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ELEMENTS 


OF 


POLITICAL   ECONOMY, 

BY  SAMUEL  P.  NEWMAN, 

II 

LECTURER  ON  POLITICAL  ECONOMY  IN  BOVVDOIX  COLLEGK. 


"The  best  security  for  a  free  government,  and  generally  for  the  public  peae« 
and  morals  is,  that  the  whole  community  should  be  well  informed  upon  its  Po- 
litical, as  well  as  its  other  interests." — Lord  Brougham, 


ANDOVER: 

GOULD    AND    NEWMAN,  PUBLISHERS. 

NEW  York: 

H.  GRIFFIN  AND  COMPANY. 

1835. 


v^^; 


\(p^ 


rv^^ 


Entered   according  to  Act  of  Congress  in  the  year   1835,  by 

GOULD  AND  NEWMAN, 
in  the  Clerk's  Office  of  the  District  Court  of  Massachusetts. 


PREFACE, 


It  has  been  a  leading  object  of  the  author  of  the  follow- 
ing work,  to  prepare  a  text  book,  in  which  the  more  im- 
portant principles  of  the  science  of  Political  Economy  are 
developed  in  their  application  to  the  usages  and  institu- 
tions of  our  own  country.  The  defect  of  the  text  books 
now  in  use  in  this  particular,  is  acknowledged  ;  and  this 
circumstance  has  tended,  in  no  small  degree,  to  prevent 
the  general  and  strong  interest  in  the  science,  as  a  branch 
of  education,  which  it  may  justly  claim.  For  in  a  self- 
governing  community,  it  is  especially  important,  that  the 
constitution  of  society  should  be  studied,  and  "  the  rea- 
sons of  things"  well  understood.  Many  unfounded  pre- 
judices are  also  thus  removed,  the  public  mind  is  enlight- 
ened, and  led  to  adopt  those  measures,  which  are  for  the 
public  good. 

The  author  has  not  deemed  it  expedient  to  embrace 
the  opinions  of  any  school  of  Political  Economists.  It 
will  be  found,  however,  that  he  is  more  indebted  to  A. 
Smith's  Inquiry  into  the  Nature  and  Causes  of  the 
Wealth  of  Nations,  than  to  any  other  work  on  this  sci- 
ence.    Many  sentiments  and  opinions  of  this  "  Father  of 


.EFACE. 


are  judged  to  be  better  founded  and  more 
,.,  than  those  of  modern  writers. 
It  is  well  known,  that  many  principles  of  this  science 
are  yet  unsettled.  On  this  account,  the  author  feels  that 
he  has  a  claim  on  the  candor  of  the  public,  and  he  would 
respectfully  request  of  all  who  may  examine  the  follow- 
ing work,  especially  of  those  using  it  as  a  text  book,  that 
its  defects,  or  any  erroneous  statements  which  it  contains, 
may  be  pointed  out  to  his  notice. 

Bowdoin  College,  July,  1835, 


CONTENTS. 


PART  I. 

PRODUCTION  AND  CIRCULATION  OF   WEALTH. 

Introduction.  A  nation  as  viewed  by  the  Political  Econo- 
mist, (Page)  12.  Objects  of  the  Science  and  plan  of  the 
work,   16. 

CHAPTER  I. 

Definitions  and  explanations  of  terms  and  phrases  used  in  the 
Science. 

Analysis.  The  earth  the  great  source  of  the  supply  of  hu- 
man wants,  18.  Labor  of  man  essential  to  obtain  these  sup- 
plies, 19.  Agriculture  defined,  19.  Manufacturing  indus- 
try defined,  20.  Commercial  industry  defined,  20.  Ex- 
planation of  the  term  Production,  20.  Superiority  of  Ag- 
riculture considered,  22.  Distinction  between  productive 
and  unproductive  laborers,  23.  How  the  natural  philoso- 
pher and  chemist  are  ranked,  23.  Of  natural  agency  and 
other  natural  aids  to  production,  24.  Extent  to  which  man 
avails  himself  of  these  aids  in  a  rude  and  in  a  civilized  state, 
2G.  Territorial  advantages,  26.  Productive  Capital,  28. 
Importance  of  it,  28.  Wealth  defined,  30.  National 
Wealth,  31. 

CHAPTER  II. 

Economical  Arrangements  for  the  production  of  Wealth. 

Explanation  of  the  phrase  "economical  arrangements,"  32. 
Right  of  property  supposed  to  exist  and  to  be  respected,  33. 
First  economical  arrangement,  33.  In  what  senses  a  territo- 
ry belongs  to  a  people,  33.  Distribution  of  lands  not  equal, 
34.  Community  of  goods  impracticable,  34.  Second  eco- 
nomical arrangement,  35.  Division  of  labor,  what  is  meant  by 
1* 


VI  CONTENTS 

it,  35.  Examples  of  it,  36.  Adam  Smith's  views  of  its  ef- 
fects, 38.  Advantages  of  division  of  labor,  41.  Limits  to 
division  of  labor,  42.  Third  economical  arrangement,  44. 
Barter  accounted  for,  44.  In  what  sense  a  system  of  barter 
exists,  45.  Its  advantages  as  seen  in  a  neighborhood,  45. 
In  different  sections  of  a  country,  47.  In  foreign  commerce, 
48. 

CHAPTER  III. 

Human  Industry. 

Extent  and  importance  of  human  industry  as  seen  in  its  re- 
sults, 50.  The  variety  of  its  forms,  51.  Personal  freedom 
favorable  to  it,  52.  Slave  labor  contrasted  with  free  labor, 
52.  On  laws  regulating  amount  of  wages,  53.  Chartered 
companies  and  apprenticeships,  54.  Such  regulations  un- 
necessary and  injurious,  55.  Oppressive  to  individuals,  56. 
Position  to  be  maintained  on  this  subject,  57.  English  sys- 
tem of  poor  laws,  57.  Labor  should  receive  a  suitable  re- 
ward, 59.  Subject  connected  with  the  quiet  of  society,  61. 
Other  causes  which  affect  human  industry,  62.  Assistance 
afforded  to  the  laborer  by  the  government  of  a  country,  64. 

CHAPTER  IV. 

JVatural  aids  to  Production. 

Extent  to  which  man  avails  himself  of  the  aids  of  nature  in 
savage  and  civilized  life  contrasted,  65.  Of  tools,  67.  Ma- 
chinery, 67.  Supposition  of  the  settlement  of  a  colony,  68. 
Effects  of  introducing  a  power  loom,  68.  Principles  infer- 
red from  preceding  statements,  71.  Objection  to  machinery 
considered,  72.  Patents  rights,  73.  Circumstances  favora- 
ble to  the  developments  of  natural  aids  to  production,  75. 
Cultivation  of  the  natural  sciences,  75.  Minute  division 
of  labor,  77.  Increased  demands  for  products,  78.  To  what 
extent  machinery  may  be  carried,  79. 

CHAPTER  V. 

Productive  Capital. 

Transformations  to  which  capital  is  subjected  in  processes  of 
production,  80.  Capital  directed  to  different  employments 
by  the  rate  of  profits,  82.     Modifications  of   the  general 


CONTENTS.  Vn 

principle,  84.  Government  should  not  interfere,  85.  Why 
the  amount  of  productive  capital  in  modern  nations  is 
greater  than  in  former  ages,  86.  How  capitalists  should  be 
regarded  in  the  community,  90.  Practical  inferences,  93. 
Simple  habits  of  life,  93.     Pure  morals,  95.     Intelligence,  9G. 

CHAPTER  VI. 

Circulation  of  Wealth. 
Medium  of  exchange,  98.  Necessity  of  it,  98.  Commodities 
used  for  this  purpose,  99.  Advantages  of  the  precious  met- 
als, 100.  Representatives  of  the  precious  metals,  102.  Bills 
of  exchange,  102.  Bank  notes,  105.  Banks  of  deposit, 
105.  Banks  of  discount,  107.  Advantages  of  them  as  con- 
nected with  the  circulation  of  wealth,  107.  Other  advanta- 
ges, 112.  Objection  considered,  114.  Measure  of  value, 
115.  Why  objects  have  value,  115.  Upon  what  exchanger 
able  value  depends,  116.  Different  objects  proposed  as 
measures  of  value,  117.  Money  not  a  perfect  measure,  118. 
Its  value  varies  with  cost  of  production  and  supply  and  de- 
mand, 118.  Subject  to  nominal  variations  of  value,  121. 
Quotation  from  A.  Smith  on  this  subject,  122. 

CHAPTER  VII. 

Price. 

How  current  prices  are  affixed  to  objects  in  the  market,  125. 
Cost  of  production  explained,  126.  Supply  and  demand 
explained,  129.  Price  as  affected  by  variations  in  money, 
131.  How  to  estimate  the  value  of  objects  whose  price  is 
mentioned  in  history,.  134.  Price  as  affected  by  the  fluctua- 
tions of  the  market,  135.  How  the  interests  of  agricultural 
producers  are  afTected  by  variations  in  the  price  of  their 
products,  1.35.  Consequences  to  the  community,  136.  Va- 
riations in  the  price  of  manufactures  considered,  139.  Price 
as  affected  by  variations  in  the  cost  of  produ'ction,  142. 
Extent  to  which  different  kinds  of  products  are  subject  to 
variations  of  price,  143.     Importance  of  uniform  prices,  144. 

CHAPTER  VIII. 

Agriculture. 
Origin  and  progress  of  Agriculture  in  a  nation,  146.    Improve- 


VIII  CONTENTS. 

ments  in  agriculture,  147.  Is  a  division  into  Jarge  or 
small  farms  advantageous  to  a  nation,  149.  How  the  gov- 
ernment may  encourage  agriculture,  149.  Opinions  of  the 
French  Economists  considered,  150.  Impression  as  to  the 
superiority  of  agricultural  production  noticed,  152. 

CHAPTER  IX. 

Manufactures. 
Circumstances  favorable  to  the  introduction  and  success  of 
manufactures,  156.  Local  effects,  of  manufactories,  160. 
Advantages  derived  from  this  branch  of  national  industry, 
163.  Developes  territorial  advantages,  164.  Furnishes 
profitable  employment  to  the  capital  and  industry  of  a  na- 
tion, 165.  Exerts  a  stimulating  effect  on  other  branches  of 
}>roduction,  166.     Objections  to  manufactures,  168. 

CHAPTER  X. 

Commerce. 
Nature  of  commercial  production  examined,  173.  Divisions  of 
commercial  industry,  177.  Retail  trade,  177.  Prejudice 
against  retailers  considered,  179.  Wholesale  trade,  180. 
Advantagesof  it  shewn,  181.  Internal  trade,  182.  No  duties 
to  be  laid  on  internal  trade,  183.  Convenient  and  safe  cur- 
rency needed,  183.  Facilities  for  transportation,  184.  Sys- 
tem of  credit,  185.  Foreign  trade,  187.  Increases  the  va- 
riety of  national  supplies,  187.  Also  the  amount,  188.  Ex- 
erts a  stimulating  influence  on  national  production,  189. 
Developes  an  important  class  of  territoral  advantages,  191. 
Offers  a  convenient  mode  of  collecting  a  public  revenue, 
191.  May  assist  in  the  introduction  of  anew  branch  of  do- 
mestic production,  192. 

CHAPTER  XI. 

On  the  restrictive  system. 
Mercantile  and  manufacturing  systems  explained,  195.  What 
is  designed  to  be  effected  by  a  restrictive  system,  197.  How 
these  results  are  effected,  198.  In  what  instances  a  restric- 
tive system  is  based  on  erroneous  principles,  199.  Free 
trade  system  described,  200.  Objections  to  free  trade  sys- 
tem considered,  203.  In  what  instance  the  restrictive  sys- 
tem is  to  be  justified,  205. 


CONTENTS.  IX 


CHAPTER  Xlf. 


On  the  different  classes  of  Productive  laborers. 

Day  laborers,  209.     The  mechanic,  210.     The  manufacturer, 

212.  Objections  to  this   department  of  labor  considered, 

213.  The  farmer,  217.     Commercial  laborers,  219,     The 
sailor,  220. 

CHAPTER  XIII. 

On  the  different  classes  of  unproductive  laborers. 

The  Physician,  222.  The  Lawyer,  224.  The  moral  and  re- 
ligious Teacher,  226.  The  literary  and  scientific  Teacher, 
228.  The  public  Functionary,  229.  Domestic  servants. 
230. 


PART  II. 

DISTRIBUTION  AND  CONSUMPTION  OF  WEALTH. 

CHAPTER  I. 

Distribution  of  Wealth. 
How  wealth  is  distributed  in  the  early  stages  of  society,  232. 
In  a  more  advanced  state,  2-34.  Wealth  should  be  left  to 
flow  unchecked,  234.  Economical  arrangement  for  the  dis- 
tribution of  wealth,  235.  Illustrations  of  this  arrangement, 
238. 

CHAPTER  II. 

Wages. 

Labor  a  commodity,  241.  Upon  what  its  price  depends,  241. 
Average  rate  of  wages  in  England,  244.  In  Ireland,  245. 
In  the  United  States,  246.  State  of  a  community  in  which 
wages  are  rising,  246.  Low  wages  connected  with  a  re- 
duced style  of  living,  247.  Variations  in  the  ratio  of  capital 
and  population  as  affecting  wages,  248.  Effects  of  variations 
in  wages,  250.  Circumstances  which  raise  the  rate  of  wages 
above  the  average  rate,  251.  Population  as  connected  with 
Political  Economy,  253. 


X  CONTENTS. 

CHAPTER  III. 

Interest,  or  profits  of  capital. 

Interest  not  paid  for  the  loan  of  money  only,  255.  Interest 
includes  premium  of  insurance,  256.  Causes  upon  which 
the  rate  of  interest  depends,  256.  How  the  rate  of  interest 
first  becomes  established  in  the  country,  257.  Supply  and 
demand  as  affecting  interest,  258,  259.  Rate  of  interest  is 
no  ground  on  which  to  judge  of  the  prosperity  of  nations, 
260.  Variations  in  the  rate  of  interest  during  a  long  pe- 
riod will  be  inconsiderable,  261.  Ought  the  rate  of  interest 
to  be  fixed  by  law,  264.    Stocks  and  stock  jobbing,  268. 

CHAPTER  IV. 

Rent,  or  profiis  of  natural  agency. 

Rent  explained,  271.  Distinction  between  natural  agency  and 
other  aids  to  nature  as  connected  with  rent,  271.  How  the 
amount  of  rent  is  determined,  274.  What  lands  pay  rent, 
275.  Improvements  of  the  soil,  how  regarded,  276.  Illus- 
tration of  the  different  causes  which  affect  rent,  278.  Prox- 
imity to  a  market  as  it  affects  rent,  280.  Supply  and  de- 
mand as  affecting  rent,  281. 

CHAPTER  V. 

Profits  of  the  Undertaker. 

Use  of  the  word  profits,  282.  Nature  of  the  service  rendered 
by  the  undertaker,  282.  Causes  which  limit  the  supply  of 
this  kind  of  service,  283.     Responsibility  assumed,  284. 

CHAPTER  VI. 

Fees  and  Salaries. 

Legal  fees,  285.  Customary  fees,  286.  Extra  fees,  287. 
Impression  as  to  compensation  for  services  of  professional 
men  considered,  288.  Salary  defined,  289.  Why  compen- 
sation is  made  in  this  form,  289.  Advantages  which  result, 
290.  Disadvantages,  291.  Variations  in  the  value  of  sala- 
ries, 291.  Objection  to  salaries  considered,  293.  Who  re- 
ceive salaries,  294. 


CONTENTS.  XI 

CHAPTER  VII. 

Consumption  of  Wealth. 

Senses  in  which  the  word  consumption  is  used,  295.  Individ- 
ual revenue  appropriated  to  the  supply  of  animal  wants,  297 — 
299.  Sumptuary  laws,  300.  Individual  revenue  appropria- 
ted to  the  payment  of  taxes,  301.  How  civil  government  is 
regarded  by  the  economist,  301.  Principles  of  taxation,  302. 
Different  kinds  of  direct  taxes,  304.  Indirect  taxes,  306. 
Application  of  A.  Smith's  principles  to  taxes  in  the  United 
States,  307.  Individual  revenue  appropriated  to  the  pay- 
ment of  unproductive  laborers,  to  amusements,  and  to  chari- 
ties, 310. 

CHAPTER  VIII. 

J^ational  expenditure. 

Charges  of  civil  and  judicial  administration,  314.  Of  wars 
and  military  and  naval  establishments,  316,  Of  the  erection 
of  public  buildings  and  of  internal  improvements,  318. 
Of  expenditure  for  the  relief  of  the  poor,  319.  Of  educa- 
tion, 322. 


POLITICAL  ECONOMY 


PART  I. 

ON  THE    PRODUCTION  AND  CIRCULATION  OF  WEALTH. 


INTRODUCTION. 

A  nation  as  viewed  hy  the  Political  Economist. 

Men  are  seen  in  their  most  improved  condition,  when 
associated  together  in  large  communities.  The  excite- 
ments of  competition  are  then  most  strongly  felt — enter- 
prise and  exertion  are  called  forth  and  liberally  rewarded. 
It  is  then  that  leisure  and  opportunity  are  found  for  the 
exercise  and  improvement  of  the  mental  powers ;  thus 
knowledge  is  increased  and  spread  abroad,  and  the  various 
arts  and  sciences  cultivated  and  advanced  towards  perfec- 
tion. In  this  state,  too,  the  social  affections  are  freely 
indulged,  and  the  refined  love  of  country,  of  family  and 
friends,  is  awakened  and  cherished. 

But  what  a  family  is  here  to  be  provided  for  !  and  how 
immense  the  amount  of  its  daily  consumption !  How  ma- 
ny bales  of  cloth  must  be  furnished  for  its  use !  What 
toil  and  skill  are  required  to  construct  habitations  for  its 
shelter  !  How  many  hands  must  be  employed  in  fabrica- 
ting the  ten  thousand  little  conveniences  of  life  within  and 
about  these  habitations ! 
2 


14  POLITICAL    ECONOMY. 

But  to  supply  the  constantly  returning  animal  wants  of 
this  national  family,  and  to  furnish  what  are  esteemed  the 
comforts  and  conveniences  of  civilized  life,  is  but  a  part 
of  what  is  to  be  accomplished.  Measures  must  be  adopt- 
ed, which  may  ensure  a  defence  both  against  foreign  foes 
and  internal  aggression.  A  civil  government  must  be  es- 
tablished and  supported ;  and,  till  the  principles  of  peace 
become  prevalent,  armies  and  navies,  with  fortifications 
and  implements  of  war,  must  be  provided. 

This  numerous  family  must  also  be  educated.  When 
the  grosser  wants  of  our  nature  have  been  met,  it  is  felt, 
that  there  are  in  man  wants  of  a  higher  and  more  exalted 
kind,  which  ask  gratification.  Men  of  cultivated  intellect 
and  extended  knowledge,  must  also  be  reared  up  to  admin- 
ister the  concerns  of  a  great  nation.  Such  minds  too  are 
needed  to  devise  and  carry  through  the  ten  thousand  pro- 
jects and  enterprises,  and  the  complicated  business  trans- 
actions of  a  large  and  thriving  community.  Here  then  is 
a  call  for  instruction,  for  books  and  the  whole  apparatus 
of  learning.  Schools,  colleges  and  the  different  semina- 
ries of  learning,  must  be  founded  and  endowed,  and  means 
used,  by  which  the  public  mind  generally  may  be  enlight* 
ened  and  elevated. 

An  intelligent  and  reflecting  people  will  also  be  mlnd- 
.  ful,  that  there  are  moral  and  religious  relations  and  duties, 
in  which  men  need  to  be  instructed.  They  will  come  to 
the  knowledge  of  civil  and  social  rights,  and  will  seek  to 
be  made  secure  in  their  enjoyment.  Aware  too  of  the 
evils  which  "  flesh  is  heir  to,"  they  will  be  led  to  inquire 
what  antidotes  and  remedies  may  give  relief  to  the  diseas- 
ed and  sufiering  body.  Thus  the  calls  for  professional 
assistance  will  arise — the  divine,  the  lawyer  and  the  phy- 


INTRODUCTION.  15 

sician  will  be  found,  each  rendering  important  service  to 
the  community. 

A  civilized  community  has  also  its  imaginary  wants  to 
be  supplied.  Under  this  head  is  included  all  that  pertains 
to  the  gratification  of  the  taste — the  refinements  and  ele- 
gancies of  life.  Such  are  the  various  productions  of  the 
fine  arts.  Such  also  are  those  articles  of  furniture,  dress 
and  equipage,  which  either  are  not  necessary  for  the  sup- 
ply of  the  absolute  wants  of  men,  or  might  be  furnished 
in  more  simple  and  less  expensive  forms. 

There  are  two  other  particulars,  in  which  the  resem- 
blance between  a  nation,  as  viewed  by  the  political  econ- 
omist, and  a  numerous  family,  might  be  traced  out.  Both 
seek  after  an  improvement  of  their  condition,  and  both  are 
called  upon  to  make  provision  for  the  increase  of  their 
numbers.  In  neither  case  is  it  thought  sufficient,  to  re- 
place what  has  been  consumed — that  the  close  of  the  year 
should  find  the  community,  or  the  family,  in  circumstan- 
ces equally  favourable  with  those  of  its  commencement. 
There  is  in  both  a  constant  struggle  for  advancement, 
for  more  enjoyment  and  greater  independence.  The 
numbers  of  both  are  also  in  ordinary  circumstances  increas- 
ing, and  "  for  every  new  comer  to  the  great  feast  of  na- 
ture, a  new  cover  must  be  provided." 

Now  for  the  supply  of  all  these  wants,  what  foresight, 
what  planning,  what  complicated  and  extended  arrange- 
ments, what  patient,  various  and  unremitted  toil,  are  re- 
quired ! 

Happily,  there  is  found  in  the  constitution  of  man  pro- 
vision for  all  that  is  thus  demanded  of  him.  He  who  in 
goodness  formed  man  a  social  being,  hath  in  wisdom  adapt- 
ed him  to  the  social  state.     There  is  the  desire  of  ad- 


16  POLITICAL  ECONOMY. 

vancement,  the  strong,  ever  active  disposition  to  improve 
our  condition.  There  is  the  reasoning  mind,  which,  in- 
structed by  the  past,  can  extend  forward  its  view  to  the 
future,  can  form  plans  and  put  measures  in  train  for  their 
accomplishment.  There  is  the  vigorous,  enduring  body, 
capable  of  strenuous  and  long  continued  effort,  and  of 
adapting  itself  with  wonderful  pliability  to  various  circum- 
stances and  pursuits.  Now  it  is  by  the  exercise  of  what 
is  thus  natural  to  man,  that  the  many  and  various  wants 
of  a  large  community  are  supplied.  While  each  individ- 
ual is  following  his  own  inclinations,  and  planning  and  la- 
boring for  himself,  seeking  his  own  aggrandisement,  and 
obtaining  a  supply  of  his  own  wants,  he  is  at  the  same 
time  planning  and  laboring  and  accumulating  for  the  whole 
community,  and  advancing  the  general  welfare. 

Objects  of  the  science  and  plan  of  the  work. 

He  who  has  thus  looked  upon  man  in  a  civilized  com- 
munity, and  considered  his  wants,  is  prepared  to  under- 
stand what  is  meant  by  Political  Economy.  The  leading 
object  of  this  science  is,  to  shew  in  what  way  the  eco- 
nomical affairs  of  a  nation  may  be  so  conducted,  that  its 
wants  may  be  supplied  and  its  prosperity  promoted.  It 
tells  us,  how  the  industry  of  a  nation  may  be  called  forth 
and  successfully  directed,  and  how  its  resources,  of  every 
kind,  may  be  developed  and  made  efficient.  It  instructs 
us,  how  what  is  thus  obtained  is  distributed  among  the  dif- 
ferent classes  and  members  of  a  community,  and  points 
out  to  us  the  several  ways,  in  which  it  may  be  judiciously 
and  profitably  consumed.  It  looks  at  the  different  em- 
ployments and  pursuits  of  men,  and  considers  them  in 
their  relation  to  each  other  and  to  the  general  welfare. 


OBJECTS  OF  THE  SCIENCE.  17 

It  looks  at  the  different  classes  of  society,  the  rich  and  the 
poor,  the  capitalist  and  the  laborer,  and  shows  their  con- 
nexion and  mutual  dependence.  It  extends  its  view  to 
foreign  nations,  and,  in  opposition  to  generally  received 
opinions,  instructs  men  to  rejoice  in  the  prosperity  of  oth- 
ers. In  fine,  it  inquires  into  all  that  pertains  to  the  busi- 
ness concerns  of  a  community,  and  investigates  those  sub- 
jects, which  are  in  any  way  connected  with  the  prosperity 
of  the  nation,  and  of  its  individual  members,  when  consid- 
ered as  a  part  of  the  community. 

It  is  not  designed  in  the  following  text  book,  to  exhibit 
any  connected  set  of  opinions  on  subjects  pertaining  to 
this  science.  Many  of  its  principles  yet  remain  unset- 
tled, and  while  this  is  the  case,  error,  if  not  embarrass- 
ment, may  result  from  following  a  system.  All  that  is 
here  attempted,  is  to  state  and  explain  those  principles  of 
the  science,  which  are  of  general  interest,  and  admit  of 
application  to  the  business  of  life,  and  at  the  same  time  to 
answer  some  of  the  inquiries,  which  naturally  arise  in  the 
mind  of  a  reflecting  man,  when  looking  upon  the  econo- 
mical arrangements  of  society.  It  is  necessary,  however, 
before  instituting  these  inquiries,  to  give  a  brief  explana- 
tion of  the  more  common  terms  and  phrases  used  in  the 
science,  and  also  to  state  with  some  minuteness,  the  ar- 
rangements of  an  economical  kind,  found  in  a  well  order- 
ed community. 

And  here  it  may  be  expedient,  very  briefly  to  notice 

a  prejudice  against  the  study  of  this  science,  which  exists 

in  the  minds  of  some.     There  are  those  who  look  upon 

all  inquiries  and  discussions  of  this  kind,  as  illiberal  and 

degrading.    They  are  associated  in  their  minds  with  what 

pertains    to    the    acquiring    and    hoarding    of    money. 
2* 


18  POLITICAL    ECONOMY. 

But  these  prejudices  arise  from  a  limited  and  erroneous 
view  of  the  science.  Who  would  not  wish  to  see  all 
around  him  enjoying  in  decent  competency,  the  com- 
forts and  conveniences  of  life?  Who  would  not  have 
each  individual  feel,  that  his  own  interests  are  deeply  in- 
volved in  the  prosperity  of  others  ?  Who  would  not  have 
the  different  orders  of  society  respect  their  mutual  rights, 
and  feel  their  mutual  dependence  ?  and  what  philanthro- 
pist does  not  desire,  that  the  nations  of  the  earth  may  un- 
derstand and  appreciate  the  advantages  of  peace  and  mu- 
tual intercourse  ?  These  are  a  part  of  the  lessons  taught 
by  this  science ;  and  surely  no  one  can  justly  pronounce  a 
study  low  and  degrading,  whose  instructions  are  thus 
practical  and  salutary. 


CHAPTER  I. 

Definitions  and  explanations  of  terms  and  phrases  used  in 
the  science. 

The  most  important  wants  of  man,  in  this  state  of  be- 
ing, are  those  of  his  animal  nature.  He  must  have  food 
and  clothing  and  shelter  convenient  for  him.  Should  the 
inquiry  be  made,  to  what  source  are  we  to  look  for  a 
supply  of  these  wants?  it  is  at  once  answered — to  the 
earth  on  which  we  dwell.  Its  fruits,  its  herbs,  its  plants, 
its  forests  and  its  animals,  are  all  made  subject  to  man, 
and  hence  he  is  to  find  his  daily  food,  the  garments  that 
cover  him,  the  fuel  that  warms  him,  and  the  habitation  by 
which  he  is  sheltered.  But  what  is  thus  spontaneously 
offered  to  man,  is  but  a  scanty  supply,  and  in  forms  and 


TERMS  AND  PHRASES.  19 

under  circumstances  but  ill  adapted  to  his  wants.  The 
same  power  which  appointed  the  earth  to  be  for  the  use 
of  man,  hath  also  said,  "of  the  sweat  of  thy  brow  shall  ^ 
thou  eat  of  the  fruit  thereof."  It  is  to  his  own  labor,  in 
connexion  with  the  fertility  of  the  soil,  and  other  natural 
advantages,  that  man  is  to  look  for  the  supply  of  his  most 
urgent  wants. 

Human  industry,  then,  is  to  be  employed  in  the  culti- 
vation of  the  earth,  and  in  adapting  the  supplies,  thus 
obtained,  to  the  wants  of  man.  Hence  arises  the  distinc- 
tion of  Agricultural,  Manufacturing  and  Commercial  la- 
bor. And  as  these  terms,  when  thus  used  in  the  science 
of  Political  Economy,  have  a  signification  somewhat  differ- 
ent from  their  popular  use,  a  short  explanation  of  them 
is  here  given. 

By  Agriculture,  in  the  popular  use  of  the  term, 
is  meant  the  cultivation  of  the  soil — that  labor  of  man 
which  is  bestowed  upon  the  earth  to  render  it  more  fer- 
tile, and  thus  to  increase  the  amount  obtained  from  it  for 
the  supply  of  human  wants.  In  its  scientific  use,  the 
term  is  extended  to  all  employments,  by  which  these  need- 
ed supplies  are  obtained  from  the  earth.  Thus  fisheries, 
raining  operations,  the  gathering  of  the  wild  fruits  of  the 
earth,  the  rearing  of  domestic  animals,  and  the  hunting  of 
game,  are  all  included  under  the  head  of  agricultural  la- 
bor. 

From  agricultural  industry,  using  the  term  in  this  ex- 
tended sense,  are  derived,  not  only  food  and  other  neces- 
saries of  life  for  immediate  consumption,  but  all  the 
materials  used  in  the  arts.  Without  agriculture,  there 
could  be  neither  manufactures,  nor  commerce.  Hence, 
no  doubt,  the  common  impression,  that  agricultural  labor 


20  POLITICAL  ECONOMY. 

is  of  more  importance  to  a  community,  than  manufactur- 
ing or  commercial.  Of  the  correctness  of  this  impression, 
we  may  better  judge,  when  definitions  of  these  terms  shall 
have  been  given. 

Manufacturing  industry  is  employed  in  adaptmg 
what  is  thus  obtained  from  the  earth  to  the  wants  of  man. 
The  process  may  consist  in  the  mixture  and  union  of  dif- 
ferent substances,  thus  forming  a  new  substance,  or  com- 
pound, or  it  may  be  the  altering  of  the  form  or  texture  of 
objects.  In  the  former  instance,  it  is  a  process  in  chemi- 
cal ;  in  the  latter,  in  mechanical  art.  Thus  all  the  arts 
of  life,  whether  chemical  or  mechanical,  and  the  common 
processes  of  domestic  industry — the  preparing  of  food, 
the  making  up  of  garments,  are  included  under  the  term 
manufactures. 

Commercial  industry  consists  in  buying  and  selling — 
in  the  transportation  of  commodities,  and  in  placing  them 
under  such  circumstances,  as  may  suit  the  convenience  of 
consumers.  It  includes  navigation  and  internal  transpor- 
tation in  all  their  different  forms.  It  includes  also  the 
labors  of  the  multitudes,  who,  as  clerks,  salesmen,  porters, 
draymen,  &,c.,  are  employed  in  large  commercial  estab- 
lishments. 

Production  is  the  adapting  of  material  objects  to  the 
wants  of  man.  He  by  whom  a  process  of  production  is 
carried  on,  is  called  a  producer,  and  the  result  of  the  pro- 
cess, a  product. 

An  analysis  of  the  different  forms  of  human  industry 
which  have  just  been  explained,  will  shew  the  meaning 
and  test  the  correctness  of  this  definition.  The  wheat 
in  the  granary  of  the  farmer,  is  an  agricultural  product. 
To  obtain  it,  he  prepared  his  grounds — he  scattered  his 


TERMS  AND  PHRASES.  21 

seed,  and  in  due  time  he  gathered  in  his  harvest.  And 
this  agricuhural  laborer  is  said  to  be  the  producer  of  a  crop 
of  wheat.  But  what  has  he  done  ?  He  has  not  brought 
into  existence  that  which  did  not  before  exist.  Availing 
himself  of  the  fertility  of  the  soil — of  the  warm  influences 
of  the  sun  and  of  the  showers  of  heaven,  by  a  process  lit- 
tle understood  by  himself,  he  has  caused  these  particles 
of  matter,  which  now  constitute  the  crop  of  wheat  in  his 
granary,  to  assume  their  present  form,  thus  in  part  adapt- 
ing them  to  the  wants  of  himself  and  his  fellow  men. 

Trace  this  same  wheat,  when  by  a  manufacturing  pro- 
cess it  becomes  bread.  It  is  ground  ;  it  is  mixed  with 
other  ingredients ;  these  are  kneaded  together  and  sub- 
jected to  the  heat  of  fire.  Thus  the  particles  of  matter 
in  the  wheat  are  made  to  undergo  both  a  chemical  and 
mechanical  action.  Their  properties  and  their  forms  are 
changed.  They  exist  now  as  a  product  in  manufactures, 
and  in  this  form  are  still  further  adapted  to  the  supply  of 
human  wants. 

These  same  material  particles,  now  in  the  form  of  bread, 
are  next  conveyed  from  the  work-shop  of  the  baker  to  the 
residence  of  the  consumer,  and  there  given  to  him  in  ex- 
change for  money,  or  any  other  object  of  value,  which 
the  consumer  is  ready  to  give  and  the  baker  to  receive, 
in  exchange  for  his  bread.  Thus  that,  which,  when  in 
the  form  of  wheat,  was  an  agricultural  product,  and  in  the 
form  of  bread  a  manufactured  product,  becomes,  as  trans- 
ported and  sold  by  the  baker,  a  commercial  product.  Its 
form  and  its  properties  remain  the  same  ;  its  location  and 
its  ownership  only  are  changed.  But  this  change  of  place 
and  of  ownership,  is  the  process  of  commercial  production, 


22 


POLITICAL  ECONOMY. 


and  obviously  it  is  another  step  in  adapting  the  products 
of  agriculture  and  manufacture  to  the  uses  of  man. 

We  now  look  at  the  product — bread  in  the  hands  of 
the  consumer,  and  we  say,  that  the  whole  process,  to  which 
the  particles  of  matter  in  this  loaf  of  bread  have  been  sub- 
jected, from  the  time  they  existed  in  their  dispersed  state 
in  the  earth,  or  in  the  air,  till  thus  given  over  to  the  con- 
sumer, is  production — the  adapting  of  what  is  found  in  the 
material  world  to  the  wants  of  man. 

It  will  be  noticed,  that  this  definition  of  production  lim- 
its its  application  to  material  objects.  Some  writers  oa 
Pohtical  Economy  extend  the  meaning  of  the  term,  and 
speak  of  immaterial  products.  But  it  is  thought,  that  the 
view  now  given  is  more  simple,  and  better  fitted  to  devel- 
ope  with  clearness  the  principles  of  the  science. 

The  inquiry  respecting  the  superiority  of  agricultural 
over  other  forms  of  industry,  may  now  be  easily  answer- 
ed. It  is  true,  there  is  a  class  of  agricultural  products — 
his  daily  food — which  is  absolutely  essential  to  the  exist- 
ence of  man.  It  is  also  true,  that  the  agricultural  labor- 
er furnishes  the  materials,  upon  which  the  other  forms  of 
industry  are  employed.  But  we  have  seen,  that  agricul- 
tural production  is  in  its  nature  the  same,  as  the  other 
forms  of  production.  In  each  case,  it  is  human  labor, 
availing  itself  of  such  helps,  as  it  can  command.  The  re- 
sult is  also  in  each  case  the  same — there  is  an  adaptation 
of  that  which  previously  existed,  to  the  wants  of  man.. 
And  in  some  climates,  those  particularly,  where  shelter  is 
needed  from  the  severity  of  cold  and  the  inclemency  of 
the  sky,  the  products  of  manufacturing  industry  seem 
equally  essential  to  existence,  with  those  of  agriculture. 


TERMS  AND  PHRARES.  23 

Populous  nations  moreover  could  not  long  exist  without 
the  aids  of  commercial  production.  There  does  not  then 
seem  to  be  a  good  foundation  for  the  impression,  above 
referred  to,  of  the  superior  importance  of  agricultural  in- 
dustry. 

From  the  definition  that  has  been  given  of  production, 
the  distinction  between  a  productive  and  unproductive  la- 
borer may  be  readily  made.  The  former  is  a  producer, 
one  employed  in  a  productive  process,  assisting  in  some 
way  in  the  adaptation  of  material  objects  to  the  wants  of 
men.  The  latter,  though  a  laborer,  and  though  his  la- 
bors may  be  highly  profitable  to  himself,  affording  him 
competency  and  perhaps  comparative  wealth,  is  engaged 
in  ministering  to  a  different  set  of  human  wants.  Profes- 
sional men,  statesmen  and  instructors,  are  unproductive 
laborers.  So  are  those  who  furnish  public  amusements, 
when  not  employed  in  the  creation  of  material  products. 
A  stage  player  and  a  musician,  are  unproductive  laborers ; 
a  painter  of  portraits  and  a  maker  of  fireworks  are  pro- 
ductive laborers.  In  the  class  of  unproductive  laborers; 
are  also  to  be  placed  most  of  those  employed  as  servants, 
and  all  those  of  every  rank  who  constitute  the  standing 
armies  and  the  marine  force  of  a  nation.  In  a  wealthy 
and  refined  community,  the  number  of  unproductive  la- 
borers is  great,  and  it  will  be  inferred  from  the  list  of 
employments  stated,  that  they  constitute  an  important 
portion  of  the  community. 

According  to  the  distinction  now  made,  the  natural 
philosopher,  and  the  chemist,  who  are  employed  in  the 
investigation  of  the  properties  and  relations  and  laws  of 
material  objects,  are  productive  laborers ;  and  such  are 
found  in  each  of  the  three  great  departments  of  human 


34  POLITICAL  ECONOMY. 

industry.  Sir  Humphrey  Davy,  while  employed  in  ex- 
amining the  nature  of  soils,  that  he  might  determine  under 
what  cultivation  different  tracts  of  land  might  be  made 
most  fertile,  was  an  agricultural  laborer.  Watt,  when  en- 
gaged in  making  discoveries  and  improvements,  pertaining 
to  steam  and  steam  engines,  and  the  adaptation  of  this 
power  to  the  arts,  was  a  manufacturing  laborer.  Fulton, 
too,  when  investigating  this  same  power  and  applying  it 
to  navigation,  was  an  efficient  commercial  laborer.  And 
this  statement  as  to  the  nature  of  scientific  labor,  holds 
true,  even  though  the  philosopher  himself  make  no  appli- 
cation of  his  discoveries  to  any  process  of  production,  but 
leaves  this  part  of  the  work  to  another.  He  is  still  to  be 
ranked  as  a  productive  laborer. 

Of  natural  agency,  and  other  natural  aids  to  production. 

In  the  processes  of  production  which  have  now  been 
explained,  human  foresight  and  ingenuity  are  the  guides, 
and,  in  most  of  them,  human  industry  is  the  principal  agent. 
But  in  different  parts  of  these  processes,  much  is  effected 
by  nature  itself.  Much  also  is  to  be  ascribed  to  the  in- 
creased efficiency  of  human  labor,  as  aided  by  the  proper- 
ties of  material  objects  and  what  are  termed  the  laws  of 
the  material  creation.  To  the  former  of  these  two  clas- 
ses of  aids  to  production,  I  propose  to  apply  the  phrase 
natural  agency,  limiting  what  is  often  used  to  denote  all 
natural  aids  of  production,  to  those  instances,  in  which  the 
process,  or  an  important  part  of  it,  is  carried  on  by  nature 
itself.  Such,  in  raising  a  crop  of  wheat,  is  that  process, 
which,  in  its  several  parts,  we  describe  as  the  springing  up, 
the  growth  and  the  ripening  of  the  grain.     Man  prepares 


AIDS  TO  PRODUCTION.  25 

the  ground,  and  scatters  the  seed,  but  nature  makes  the 
plant  to  germinate  and  grow.  And  thus  it  is,  that  nature 
itself  becomes  active  in  the  work ;  and  this  aid,  thus  ex- 
tended to  man,  is  natural  agency.  So  again,  in  the  man- 
ufacturing of  wheat  into  bread,  the  process  of  fermentation 
is  a  part  of  the  work  of  production  carried  on  by  nature 
itself,  and  affords  another  example  of  natural  agency. 

The  other  class  of  natural  aids  to  production,  includes 
those  instances,  in  which  human  labour  is  the  efficient 
agent,  but  in  doing  the  work,  it  avails  itself  to  a  greater  or 
less  extent  in  different  instances,  of  the  properties  of  ma- 
terial objects.  In  preparing  his  ground  for  a  crop,  the 
farmer  makes  use  of  his  plough.  But  for  this  important 
implement  in  husbandry,  man  is  indebted  to  certain  proper- 
ties of  iron,  its  malleability  and  its  hardness,  and  to  the 
toughness  and  flexibility  and  strength  of  wood,  of  which 
materials  the  plough  is  constructed.  So,  in  that  most  im- 
portant aid  to  manufacturing  and  commercial  production— 
the  steam  engine,  it  is  to  the  properties  of  different  met- 
als, and  of  steam,  or  more  properly  of  fire  and  water  and 
air,  that  man  is  indebted  for  an  assistant  most  efficient  in 
itself,  and  admitting  of  various  applications.  And  thus  it 
is,  that  under  the  guidance  of  human  ingenuity,  the  pro^ 
perties  of  material  objects  and  the  great  laws  of  nature, 
such  as  gravitation,  elasticity,  galvanism,  &c.  which  in 
fact  are  but  properties  of  material  objects,  become  aids  to 
production. 

And  here  it  may  be  noticed,  that  the  assistance  derived 
from  natural  agency,  using  the  phrase  in  the  limited  sense 
now  stated,  is,  for  the  most  part,  confined  to  agricultural 
production.  To  some  extent  it  is  found  in  manufactures, 
chiefly  in  the  chemical  arts.  In  commercial  production, 
3 


26 


POLITICAL    ECONOMY. 


it  is  unknown.  The  other  class  of  natural  aids,  though 
found  to  the  greatest  extent  in  manufactures,  is  common 
to  the  three  great  divisions  of  human  industry.  The  im- 
portance of  this  distinction  will  hereafter  be  seen. 

Of  the  aids  to  production  now  described,  man  in  a  rude 
state  of  society,  avails  himself  but  to  a  limited  extent.     He 
gathers  the  spontaneous  offerings  of  the  earth,  and  makes 
some  awkward  and  inefficient  attempts  to  cultivate  the  soil ; 
he  has  also  his  implements  for  securing  his  game,  his  canoe, 
his  stone  hatchet,  and  perhaps  some  rude  agricultural  tool. 
But  of  most  of  the  natural  aids  to  production  around  him, 
it  may  be  said,  that  they  are  useless  to  him.     He  knows 
not  of  their  existence,  or,  if  he  knows  of  them,  he  wants 
the  ingenuity  and  patient  toil,  necessary  to  turn  them  to  ac- 
count.    Of  what  avail  to  him  are  a  fertile  soil — the  pro- 
pelling force  of  the  wind — the  strong  movement  of  the 
descending  river,  or  the  expansive  power  of  steam.     But 
in  civilized  communities,  where  science  and  art  have  taught 
men  the  importance  of  natural  agency,  and  the  properties 
of  material  objects  around  them,  and  further  have  instructed 
them  in  what  ways  these  aids  to  production  may  be  applied, 
important  advantages  are  derived  from  this  source.     In  al- 
most every  department  of  industry,  these  labor  saving  ma- 
chines are  found,  and  thus  the  efficiency  of  human  labor  is 
increased  a  hundred  fold. 

It  has  been  stated,  that  the  earth  is  the  source,  to  which 
man  is  to  look  for  the  supply  of  his  wants.  And  as  differ- 
ent portions  of  the  earth,  or  territories,  offer  these  supplies, 
or  the  aids  of  nature  by  which  they  may  be  obtained,  in 
varying  degrees  of  amount  and  perfection,  they  are  said 
to  possess  more  or  less  of  territorial  advantages. 

In  the  enumeration  of  territorial  advantages,  a  fertile  soil, 


AIDS  TO  PRODUCTION.  27 

oiFering  in  rich'abundance  nutritious  fruits  and  plants  for  food, 
is  of  the  first  importance.  Timber  and  other  materials  for 
building — forest  trees  or  coal-mines  for  fuel — materials  for 
the  manufacture  of  cloth — mill  privileges — metals  and 
woods  of  different  kinds,  used  in  the  construction  of  ma- 
chinery and  in  the  arts — fisheries  and  mines  of  the  precious 
metals,  may  also  be  specified. 

In  judging  of  the  relative  importance  of  the  territorial  ad- 
vantages of  different  countries,  the  two  following  principles 
should  be  regarded. 

1.  Of  those  commodities  which  are  essential  to  the  sup- 
ply of  a  nation's  wants,  it  is  desirable,  that  a  territory  should 
furnish  such  as  are  with  difficulty  transported  from  a  dis- 
tance. 

2.  Of  the  territorial  advantages  which  rank  under  the 
head  of  aids  to  production,  those  are  more  important  which 
belong  to  the  class  of  natural  agents,  than  those  which  be- 
long to  aids  of  the  second  class. 

From  both  of  these  principles,  the  superior  advantages 
of  a  territory  offering  a  full  supply  of  agricultural  products 
and  facilities  for  agricultural  production,  might  be  inferred. 
In  illustration  of  the  former,  I  might  refer  to  those  ex- 
tensive tracts  of  land  in  the  Western  States  which  are  des- 
titute of  timber  and  other  materials  for  building,  and  also 
of  fuel.  It  is  well  known  that  though  the  soil  of  this 
region  is  favourable  to  the  raising  of  grain,  the  absence  of 
the  agricultural  products  just  mentioned,  which  are  with 
difficulty  transported  from  a  distance,  much  diminishes  the 
value  of  that  portion  of  our  country. 


28  POLITICAL    ECONOMY. 

Productive  Capital. 

When  men  know  how  to  avail  themselves  of  the  help 
of  natural  agency,  and  other  natural  aids  to  production, 
and  thus  to  increase  the  amount  of  what  is  obtained  by 
their  labor,  they  find  themselves  in  possession  of  larger 
supplies,  than  their  immediate  necessities  require.  Of  the 
surplus  thus  obtained,  the  desire  of  improving  their  con- 
dition, leads  them  to  lay  aside  a  portion,  as  a  provision  for 
the  future.  Thus,  by  well  directed  industry  and  frugality, 
accumulations  are  made.  A  part  of  what  is  thus  acquired 
and  saved  by  individual  producers,  will  be  vested  in  such 
objects  as  will  promote  their  comfort  and  enjoyment — in 
clothing,  houses,  furniture,  &;c.  Another  portion,  and  in 
a  wealthy  community  this  portion  is  large,  is  employed  by 
its  possessors  to  aid  them  in  obtaining  further  supplies.  It 
thus  becomes  an  aid  to  production,  and  bears  the  name  of 
productive  capital. 

The  forms  in  which  productive  capital  exists,  are  va- 
rious. In  agricultural  nations,  much  is  expended  in  the 
permanent  improvements  of  lands,  in  cattle,  in  barns,  gra- 
naries, and  in  different  implements  of  husbandry.  In 
manufacturing  nations,  a  large  amount  exists  in  the  form 
of  machinery,  in  buildings,  and  in  the  materials  used  in 
different  manufactures.  So  far  as  a  nation  is  commercial 
in  its  habits,  there  will  be  investments  in  ware-houses, 
ships,  and  conveniences  for  internal  transportation.  And 
whatever  be  the  prevailing  form  of  industry,  especially  if 
it  be  manufacturing,  a  large  outlay  of  capital  must  be 
made  in  giving  support  to  laborers,  who  are  engaged  in 
processes  of  production. 

The  importance  of  capital  as  an  aid  to  production,  is 


PRODUCTIVE  CAPITAL.  29 

learned  from  the  condition  of  those  nations,  in  which,  from 
any  cause,  there  is  a  deficiency.  Here  is  the  source  of 
many  of  those  embarrassments  and  hindrances,  to  which 
newly  settled  countries  are  subjected.  Many  forms  of 
industry,  which  are  highly  profitable,  and  to  which  from 
its  territorial  advantages  the  nation  is  adapted,  cannot  be 
pursued,  and  if  they  are  attempted,  it  is  at  great  disad- 
vantage. It  is  indeed  sometimes  the  case,  that  the  in- 
dustrious habits  of  a  people — the  strength  and  fertility  of 
their  soil,  and  the  superiority  of  their  other  territorial  ad- 
vantages, will  counterbalance  in  some  good  degree  this 
deficiency.  But  even  in  such  nations,  if,  from  any  cause 
— the  coming  in  of  new  members  of  the  community,  who 
are  men  of  wealth,  or  perhaps  from  prosperous  returns  to 
adventures  in  commerce — important  accessions  of  capital 
are  made,  the  salutary  effects  are  at  once  seen. 

Other  instances,  teaching  the  same  lesson,  are  found  in 
those  nations,  which  from  wasting  wars,  or  other  causes 
of  desolation,  are  deprived  of  the  capital  they  possessed. 
It  is  but  slowly,  that  such  nations  recover  from  the  redu- 
ced state,  to  which  they  have  been  brought.  In  all  their 
attempts  to  regain  their  former  wealth  and  prosperity, 
they  are  crippled  and  impeded  from  their  want  of  cap- 
ital, and  perhaps  are  obliged  to  abandon  many  profitable 
forms  of  labor,  in  which  they  had  before  been  engaged. 
The  want  of  capital  becomes  the  subject  of  common 
lamentation ;  and  all  are  ready  to  acknowledge,  that  the 
proverb — the  poor  man's  poverty  is  his  ruin,  is  as  appli- 
cable to  communities  as  to  individuals. 


3* 


30  POLITICAL    ECONOMY. 

Wealth. 

The  word  wealth,  in  our  common  application  of  the 
term  to  individuals,  is  used  relatively.  A  man  has  wealth, 
who,  compared  with  others  around  him,  possesses  a  large 
share  of  those  commodities,  which,  being  adapted  to  the 
supply  of  human  wants,  whether  these  wants  are  real  or 
imaginary,  are  esteemed  of  value.  A  fine  painting,  or  a 
collection  of  shells,  in  a  community  where  those  are  found 
who  are  willing  to  give  for  these  objects  money,  or  any 
other  article  generally  esteemed  valuable,  may  constitute 
wealth,  as  much  so,  as  wheat,  or  money  itself.  Such  is 
the  meaning  of  the  term  wealth,  when  applied  to  individ- 
uals, and  it  is  used  in  the  same  signification  in  the  science 
of  political  economy,  except  that  it  loses  its  relative  appli- 
cation. 

If  we  further  examine  the  use  of  the  term,  as  applied  to 
individuals,  we  find,  that  it  is  used  to  denote  material  ob- 
jects only,  and  such  material  objects,  as  from  their  nature 
may  be  appropriated  and  transferred  from  one  possessor 
to  another.  Air  and  water  are  essential  to  human  exis- 
tence, but,  in  ordinary  circumstances,  they  cannot  be- 
come the  property  of  one  individual,  to  the  exclusion  of 
others,  and  hence  they  are  not  objects  of  wealth.  Some- 
times, in  a  season  of  drought,  or  in  a  country  where  wells 
are  few,  water  may  be  appropriated,  and  then  it  consti- 
tutes a  part  of  the  wealth  of  its  possessor.  Knowledge 
and  mechanical  skill  are  also  esteemed  valuable,  but  they 
are  not  wealth,  for  they  are  not  material  objects,  neither 
can  they  be  transferred  from  one  possessor  to  another. 
Now  those  material  objects  which  may  be  appropriated 
and  transferred,  and  which  are  esteemed  generally  as  val- 


WEALTH.  31 

uable,  are  said  to  possess  exchangeable  value.  Hence, 
wealth  may  be  defined  as  a  term  used  to  denote  those 
material  objects,  which  bear  an  exchangeable  value. 

National  wealth  includes  whatever  material  objects, 
bearing  exchangeable  value,  are  possessed  by  the  individ- 
ual members  of  a  nation,  whether  in  their  private  capaci- 
ty, or  as  members  of  a  corporation,  or  as  members  of  a 
civil  community.  Every  material  object  bearing  ex- 
changeable value,  in  the  possession  of  the  individual  mem- 
bers of  a  nation,  is  a  part  of  the  wealth  of  that  nation,  and 
the  whole  amount  of  a  nation's  wealth,  is  the  sum  total  of 
what  is  thus  possessed  by  individuals. 

Here  perhaps  it  may  be  asked,  how  securities,  both 
public  and  private,  notes  of  hand,  and  other  obligations  of 
a  like  nature,  are  to  be  regarded.  A  large  portion  of  the 
wealth  of  individuals,  consists  in  well  secured  debts.  Do 
these  debts  make  up  a  part  of  national  wealth  ?  It  may 
be  said  in  reply,  that  objects  bearing  exchangeable  value, 
alone  constitute  national  wealth,  and  the  obligation,  which 
one  member  of  the  community  is  under  to  another,  to  con- 
vey a  stated  amount  of  these  objects,  cannot  add  to  the 
amount  in  the  nation.  .  When,  however,  we  look  on  na- 
tions in  their  commercial  intercourse  with  each  other,  the 
excess  of  what  is  due  by  foreigners  to  the  members  of  one 
nation,  above  what  is  due  by  the  members  of  this  nation 
to  foreigners,  if  well  secured,  may  be  counted  as  a  part  of 
national  wealth,  for  it  gives  a  title  to  a  certain  amount  of 
those  objects,  which  bear  exchangeable 

Library.  J 

0/ Onliform^    -;::^ 


33 


CHAPTER   II. 

Economical  Arrangements. 

In  here  introducing  the  phrase  "  economical  arrange- 
ments," I  design  to  use  it  in  the  sense,  in  which  it  is  ap- 
plied to  a  family.  If  in  domestic  management,  such  plans 
are  adopted,  as  promote  the  prosperity  of  the  family,  turn- 
ing its  resources  to  good  account,  supplying  its  wants  at 
the  least  expense,  and  apportioning  to  each  one  according 
to  his  necessities  and  his  claims,  we  might  speak  of  these 
plans  as  economical  arrangements.  In  the  same  manner, 
in  the  management  of  the  concerns  of  the  great  national 
family,  if  territorial  advantages,  and  other  resources,  are 
turned  to  the  best  account,  so  that  the  amount  of  products 
obtained  is  large,  in  proportion  to  the  advantages  for  pro- 
duction possessed  by  the  nation, — and  if,  further,  there  is 
a  well  ordered  distribution  of  what  is  thus  obtained,  among 
the  different  members  of  the  community,  we  might  speak 
of  the  plans  and  course  of  things,  which  lead  to  these  re- 
sults, as  economical  arrangements.  In  the  view  here  ta- 
ken of  this; subject,  an  individual  is  supposed  to  look  on  a 
community,  in  an  advanced  state  of  its  existence  and  in  a 
prosperous  and  thriving  condition,  and  to  ask  himself,  what 
is  the  management,  or  what  are  the  economical  arrange- 
ments, by  which  these  prosperous  results  have  been  secur- 
ed? And  in  answering  this  inquiry,  the  attention  is  first 
directed  to  those  arrangements  which  relate  to  the  pro- 
duction of  wealth.  Those  connected  with  its  distribution 
will  be  found  in  the  second  part  of  the  work. 


ECONOMICAL  ARRANGEMENTS.  33 

Economical  arrangements  for  the  production  of  wealth. 

In  all  nations  in  which  civil  government  is  established, 
and  in  which  advances  have  been  made  in  civilization  and 
wealth,  the  rights  of  property  are  acknowledged  and  res- 
pected. However  wealth  may  have  been  obtained  by  the 
members  of  such  communities,  whether  by  industry — by 
the  use  of  natural  aids  to  production,  or  of  productive  cap- 
ital, or  whether  it  has  been  received  by  inheritance,  or 
gift,  or  in  any  other  manner,  in  accordance  with  the  prin- 
ciples of  justice  and  honesty,  it  is  secured  to  its  rightful 
owner.  It  belongs  not  to  the  science  of  Political  Econo- 
my, to  investigate  the  principles  on  which  the  right  of  ^ 
property  is  founded,  or  to  state  the  methods,  by  which  it 
is  most  fully  and  effectually  secured.  In  all  the  reason^  '' 
ings  of  this  science,  it  is  supposed  that  this  right  exists 
and  is  respected. 

One  form  of  property  thus  secured   to  individuals,  is  \y 
land  and  other  territorial  advantages,  and   this  appropria-  j 
tion  of  land  and  other  natural  aids  for  the  production  of  ' 
wealth,  is  the  first  economical  arrangement,  which  claims 
our  attention. 

Nations  are  said  to  possess  the  territories  which  they 
inhabit.  This  country  once  belonged  to  the  aboriginal 
Indians.  It  is  now  the  territory  of  the  United  States. 
In  this  sense  of  property,  it  is  meant,  that  the  authorities 
of  a  country  exercise  a  jurisdiction  over  it,  and  have  a 
right  to  appropriate  to  national  uses  whatever  is  required 
for  public  defence,  and  the  administration  of  civil  govern- 
ment. It  is  still  further  meant,  that  this  territory  is  the 
portion  of  the  earth's  surface,  where  the  members  of  this 
nation  find  a  home,  and  to  which  they  look  as  the  source, 
whence  a  supply  of  their  wants  is  to  be  obtained, 


34  POLITICAL    ECONOMY. 

But  there  is  another  sense,  in  which  a  territory  is  the 
property  of  the  people  who  inhabit  it.  The  lands  pos- 
sessed by  a  nation,  are  divided  into  portions  of  different 
extent,  and  appropriated  to  individuals.  Those  who  thus 
become  proprietors  of  the  soil,  are  permitted  to  use  the 
tracts  of  land,  which  they  possess,  for  their  own  benefit, 
being  entitled  to  whatever  products  are  obtained  from  them  ; 
and  further,  they  may,  at  pleasure,  convey  their  title  in 
the  lands  thus  owned  by  them  to  others.  The  same  ar- 
rangement exis^ts  in  respect  to  all  other  territorial  advan- 
tages, which  from  the  nature  of  the  case,  can  be  appropria- 
ted.    Such  are  water  privileges,  fisheries  and  mines. 

It  will  be  noticed,  that  this  division  of  lands  and  other 
natural  aids  to  production,  among  the  inhabitants  of  a 
country,  is  far  from  being  an  equal  distribution.  Some 
possess  extensive  tracts  pf  land — more  than  they  can  cul- 
tivate, and  much  more  than  is  needed  to  furnish  a  supply 
of  their  wants.  Others  have  no  property  in  lands.  So  it 
is  with  respect  toother  territorial  advantages;  they  are 
unequally  distributed.  The  members  of  a  community,  in 
which  the  rights  of  property  are  recognized,  are  not  per- 
mitted to  look  on  the  bounties  of  nature,  as  a  common 
stock,  of  which  all  are  entitled  to  share  alike  ;  neither  can 
each  one,  without  interfering  with  the  rights  of  others,  avail 
himself  of  the  more  important  natural  aids  to  production. 

That  this  distribution  and  appropriation  of  land  and 
other  territorial  advantages,  is  an  economical  arrangement, 
tending  to  increase  the  amount  of  products,  may  be  easi- 
ly seen.  It  is  in  this  way,  that  the  selfish  principles  in 
man  are  called  into  exercise,  and  thus  a  more  careful  and 
skilful  cultivation  of  the  soil,  and  a  better  improvement  of 
other  aids  to  production,  are  secured,  than  would  other- 


ECONOMICAL  ARRANGEMENTS.  35 

wise  be  made.     On  the  same  principle,  a  profuse  and 
wasteful  use  of  the  bounties  and  aids  of  nature  is  prevent- 
ed.     Experience  has  abundantly  shewn,  that  these  ben- 
efits result  from  the  arrangement,  we  are  considering. 
Men  will  not  labor,  unless  they  are  permitted  to  reap  the 
fruit  of  their  labors  ;  neither  will  economy  be  practised  in 
the  use  of  those  supplies  or  resources,  which  are  not  ap- 
propriated to  individuals.     Each  one  in  his  eagerness  to 
supply  his  own  wants,  becomes  reckless  of  the  general 
good.     In  no  instances,  except  where  men  have  come  un-    j 
der  the  influence  of  the  Christian  religion,  or  some  equal-    \ 
ly  strong  pervading  principle,  and  then  only  in  small  so-     \ 
cieties,  has  a  community  of  goods  been  found  practicable.     ) 

That  this  economical  arrangement  is  highly  important, 
and  also  that  those  who  possess  aids  to  production  of  any 
kind,  should  be  made  secure  in  what  is  thus  appropriated 
to  them,  we  may  learn  by  looking  at  those  countries,  in 
which,  either  from  the  weakness,  or  the  oppressive  exac- 
tions of  the  government,  this  security  is  not  enjoyed. 
The  Ottoman  dominions,  are  often  referred  to  as  exam- 
ples of  this  kind. 

Another  economical  arrangement,  which  is  found  in  ev- 
ery prosperous  and  thriving  community,  is  what,  in  this 
science,  is  called  division  of  labor. 

The  wants  of  men  become  more  numerous  and  various, 
as  society  advances  in  wealth  and  refinement.  Hence  we 
should  anticipate  a  corresponding  variety  in  the  employ- 
ments of  each  member  of  a  community  thus  advanced. 
But  directly  the  reverse  is  witnessed.  As  the  wants  of  men 
are  multiplied  and  become  more  varied,  their  employments 
become  more  limited  and  single.  In  the  earliest  state  of 
society,  each  one  is  employed  in  supplying  his  own  differ- 


OO  POLITICAL    ECONOMY. 

ent  wants.  A  part  of  his  time  is  spent  in  obtaining  food; 
another  portion  in  providing  clothing,  another  in  supplying 
himself  with  a  few  simple  articles  of  furniture;  and  so  of 
other  urgent  wants.  We  look  at  a  community  more  ad- 
vanced, and  we  find  its  members  engaged,  each  one  in  fur- 
nishing some  one  of  these  needed  commodities,  both  for 
himself  and  for  others,  depending  on  the  productive  exer- 
tions of  those  around  him,  for  the  supply  of  other  wants. 
A  further  progress  is  made  in  the  condition  of  the  commu- 
nity, its  wants  are  increased  and  a  large  proportion  of  its 
members  are  employed,  each  one  in  contributing  some  mi- 
nute fractional  part  only  in  the  production  of  the  commodi- 
ties, by  which  these  more  numerous  wants  are  supplied. 
Hardly  any  one  seems  to  be  exerting  himself  to  obtain 
those  commodities,  which  he  himself  needs,  and  many 
are  employed  in  the  production  of  articles,  which  they 
themselves  are  not  accustomed  to  use.  This  statement 
exhibits  to  us,  what  is  denoted  by  the  phrase  division  of 
labor,  and  shews  us,  that  the  degree  of  minuteness,  to 
which  this  arrangement  is  carried,  corresponds  to  the 
progress  of  a  community  in  refinement  and  wealth. 

To  learn  more  of  the  nature  of  this  arrangement,  it  may 
be  traced,  as  it  is  found  in  the  three  great  departments  of 
human  industry.  Indeed  this  division  is  itself  the  division 
of  labor,  and  offers  an  illustration  of  the  arrangement  we 
are  examining.  But  it  is  here  proposed  to  look  at  the  more 
minute  divisions,  or  rather  subdivisions  of  labor  found  in 
these  departments. 

It  is  in  large  manufacturing  establishments,  that  the  most 
striking  examples  of  division  of  labor  are  seen.  Adam 
Smith,  in  his  Wealth  of  Nations,  has  stated  the  instance  of  a 
pin  manufactory,  and  told  us  of  some,  the  business  of  whose 


ECONOMICAL  ARRANGEMENTS.  37 

lives  it  is,  to  make  the  eighteenth  part  of  a  pin.  The  cotton 
manufactories  of  the  present  day,  offer  an  example  of  the 
same  minute  division  of  labor.  The  process  of  making 
a  yard  of  printed  cahco  is  divided  into  twenty  five  or  thirty 
distinct  parts  ;  each  of  these  parts  requiring  one,  and  some 
of  them  two  or  more  laborers.  Looking  then  at  the  frac- 
tional part  assigned  to  each  laborer,  it  may  be  asserted  in 
the  same  sense  as  before,  that  there  are  those,  the  business 
of  whose  lives  it  is,  to  fabricate  the  thirtieth  part  of  a  yard 
of  calico.  But  it  will  be  noticed,  that  such  instances  are 
more  striking  than  others,  because  a  greater  number  of  the 
processes  directed  to  the  production  of  a  single  commodity, 
are  conducted  under  the  same  roof,  or  in  the  same  estab- 
lishment. This  however  is  not  essential.  The  production 
of  a  manufactured  commodity  may  be  carried  on  in  differ- 
ent places,  at  different  times,  and  by  different  laborers,  and 
thus  offer  an  example  of  division  of  labor  as  minute,  though 
not  so  obvious,  as  some  that  have  been  stated. 

Commercial  industry,  next  to  manufacturing,  offers  ex- 
amples of  minute  division  of  labor.  .  This  arrangement  is 
seen  in  its  fullest  extent,  in  the  retail  business,  as  conduct- 
ed in  large  commercial  cities.  Here  are  found  extensive 
establishments  for  the  sale  of  a  single  article  of  grocery,  of 
tea,  for  instance,  or  of  vinegar.  And  connected  with  each 
of  these  establishments,  are  many  individuals,  whose  em- 
ployments are  entirely  distinct  from  each  other.  One 
purchases  the  article  of  trade  ;  others  are  salesmen — oth- 
ers, clerks  ;  others  are  employed  in  weighing,  measuring, 
he.  Estimating  then  the  labor  of  an  individual  in  the 
same  manner  as  before,  it  may  be  said  to  be  the  business 
of  his  hfe,  to  do  the  tenth,  or  perhaps  twentieth  part  of  the 
process  of  retailing  a  gallon  of  vinegar,  or  a  pound  of  tea. 
4 


38  POLITICAL  ECONOMY. 

Agricultural  labor  admits  of  division,  far  less  than  Man- 
ufactures and  Commerce.  So  important  is  the  aid  of  na- 
ture in  this  department  of  production  ;  or  rather  so  large 
a  proportion  of  the  work  in  agricultural  productive  pro- 
cesses, is  effected  by  natural  agents,  that  man  is  obliged  to 
accommodate  his  efforts  to  this  agency  of  nature.  Men  can 
employ  themselves  in  planting — in  rearing  the  plants  that 
nature  sends  forth,  and  in  gathering  the  harvest,  only  at 
particular  seasons.  Hence  the  same  laborer  may  conven- 
iently perform  different  parts  of  the  work,  in  furnishing 
any  one  agricultural  product,  and  also  be  engaged  at  the 
same  time  in  raising  different  products.  Still,  in  circum- 
stances which  are  favorable,  division  of  labor  is  found  to 
some  extent  even  in  agriculture.  In  populous  countries, 
some  are  employed  as  gardeners,  others  as  shepherds,  and 
others  again  direct  their  efforts  to  the  furnishing  of  some 
one  agricultural  product  for  the  market.  And  if,  in  the 
enlarged  use  of  the  term  agriculture,  we  include  mining 
operations  and  fisheries,  further  illustrations  are  found  in 
these  departments  of  labor. 

That  the  arrangement  now  exhibited,  is  to  a  high  de- 
gree economical,  may  be  inferred  from  the  results,  which 
are  witnessed  wherever  it  exists.  On  this  topic,  I  take 
the'liberty  of  introducing  the  following  striking  extract 
from  the  Wealth  of  Nations. 

"It  is  the  great  multiplication  of  the  productions  of  all 
the  different  arts  in  consequence  of  the  division  of  labor, 
which  occasions,  in  a  well  governed  society,  that  univer- 
sal opulence  which  extends  itself  to  the  lowest  ranks  of 
the  people.  Every  workman  has  a  great  quantity  of  his 
own  work  to  dispose  of  beyond  what  he  himself  has  occa- 
sion for  ;  and  every  other  workman  being  exactly  in  the 


ECONOMICAL    ARRANGEMENTS.  39 

same  situation,  he  is  enabled  to  exchange  a  great  quanti- 
ty of  his  own  goods  for  a  great  quantity,  or,  what  comes 
to  the  same  thing,  for  the  price  of  a  great  quantity  of 
theirs.  He  supphes  them  abundantly  with  what  they 
have  occasion  for,  and  they  accommodate  him  as  amply 
with  what  he  has  occasion  for,  and  a  general  plenty  dif- 
fuses itself  through  all  the  different  ranks  of  the  society. 

Observe  the  accommodation  of  the  most  common  artificer 
or  day  laborer  in  a  civilized  and  thriving  country,  and  you 
will  perceive  that  the  number  of  people  of  whose  industry 
a  part,  though  but  a  small  part,  has  been  employed  in  pro- 
curing him  this  accommodation,  exceeds  all  computation. 

The  woollen  coat  for  example,  which  covers  the  day" 
laborer,  as  coarse  and  rough  as  it  may  appear,  is  the  pro- 
duce of  the  joint  labor  of  a  great  multitude  of  workmen. 
The  shepherd,  the  sorter  of  the  wool,  the  wool-comber 
or  carder,  the  dyer,  the  scribbler,  the  spinner,  the  weav- 
er, the  fuller,  the  dresser,  with  many  others,  must  all  join 
their  different  arts,  in  order  to  complete  even  this  homely 
production.  How  many  merchants  and  carriers,  be- 
sides, must  have  been  employed  in  transporting  the 
materials  from  some  of  those  workmen  to  others  who 
often  live  in  a  very  distant  part  of  the  country  !  how  much 
commerce  and  navigation  in  particular,  how  many  ship- 
builders, sailors,  sail-makers,  rope-makers,  must  have 
been  employed  in  order  to  bring  together  the  different 
things  made  use  of  by  the  dyer,  which  often  come  from 
the  remotest  corners  of  the  world  !  What  a  variety  of  la- 
bor too  is  necessary  in  order  to  produce  the  tools  of  the 
meanest  of  those  workmen !  To  say  nothing  of  such 
complicated  machines  as  the  ship  of  the  sailor,  the  mill  of 
the  fuller,  or  even  the  loom  of  the  weaver,  let  us  consider 


40  POLITICAL  ECONOMY. 

only  what  a  variety  of  labor  is  requisite  in  order  to  form 
that  very  simple  machine,  the  shears  with  which  the  shep- 
herd clips  the  wool.  The  miner,  the  builder  of  the  fur- 
nace for  smelting  the  ore,  the  feller  of  the  timber,  the 
burner  of  the  charcoal  to  be  made  use  of  in  the  smelting 
house,  the  brick-maker,  the  brick-layer,  the  workmen  who 
attend  the  furnace,  the  mill-wright,  the  forger,  the  smith, 
must  all  of  them  join  their  different  arts  in  order  to  pro- 
duce them.  Were  we  to  examine  in  the  same  manner, 
all  the  different  parts  of  his  dress  and  household  furniture, 
the  coarse  linen  shirt  which  he  wears  next  his  skin,  the 
shoes  which  cover  his  feet,  the  bed  which  he  lies  on,  and  all 
the  different  parts  which  compose  it,  the  kitchen  grate  at 
which  he  prepares  his  victuals,  the  coals  which  he  makes 
use  of  for  that  purpose,  dug  from  the  bowels  of  the  earth, 
and  brought  to  him  perhaps  by  a  long  sea  and  long  land 
carriage,  all  the  other  utensils  of  his  kitchen,  all  the  fur- 
niture of  his  table,  the  knives  and  forks,  the  earthen  or 
pewter  plates  upon  which  he  serves  up  and  divides  his 
victuals,  the  different  hands  employed  in  preparing  his 
bread  and  his  beer,  the  glass  window  which  lets  in  the 
heat  and  the  light  and  keeps  out  the  wind  and  the  rain, 
with  all  the  knowledge  and  art  requisite  for  preparing  that 
beautiful  and  happy  invention,  without  which  these  north- 
ern parts  of  the  world  could  scarce  have  afforded  a  very 
comfortable  habitation,  together  with  the  tools  of  all  the  dif- 
ferent work-men  employed  in  producing  those  different  con- 
veniences ;  if  we  examine,  I  say,  all  these  things,  and  con- 
sider what  a  variety  of  labor  is  employed  about  each  of 
them,  we  shall  be  sensible  that  without  the  assistance  and 
co-operation  of  many  thousands,  the  very  meanest  person 
in  a  civilized  cou  niCijcouId  not  be  provided,  even  according 


ECONOMICAL  ARRANGEMENTS.  41 

to  what  we  very  falsely  imagine,  the  easy  and  simple  man- 
ner in  which  he  is  commonly  accommodated.  Compar- 
ed, indeed  with  the  more  extravagant  luxury  of  the  great, 
his  accommodation  must  no  doubt  appear  extremely  sim- 
ple and  easy ;  and  yet  it  may  be  true,  perhaps,  that  the 
accommodation  of  an  European  prince  does  not  always  so 
much  exceed  that  of  an  industrious  and  frugal  peasant,  as 
the  accommodation  of  the  latter  exceeds  that  of  many  an 
African  king,  the  absolute  master  of  the  lives  and  liberties 
of  ten  thousand  naked  savages." 

It  is  easy  to  assign  the  causes  of  the  economical  results 
brought  to  view  in  the  preceding  extract.  Every  one 
knows,  that  in  manual  labor  a  sleight  of  hand  is  acquired 
by  the  frequent  repetition  of  the  same  process.  Indeed, 
to  all  the  labors,  both  of  the  mind  and  of  the  body,  the  max- 
im, *'  practice  makes  perfect,"may  be  applied.  Hence, 
as  the  employments  of  laborers  become  more  simple  and 
limited,  their  skill  and  dexterity  are  greater.  And  as  this 
principle  is  extended  through  the  various  departments  of 
industry,  the  products  which  result  are  larger  in  amount 
and  superior  in  their  quality. 

The  saving  of  time,  which  would  otherwise  be  lost  in 
passing  from  one  employment  to  another,  is  a  further  ad- 
vantage connected  with  division  of  labor.  This  advan- 
tage, says  A.  Smith,  "  is  much  greater,  than  we  should  at 
first  view  be  apt  to  imagine  it.  It  is  impossible  to  pass 
very  quickly  from  one  kind  of  work  to  another,  which  is 
carried  on  in  a  different  place,  and  witk  quite  different 
tools.  A  country  weaver,  who  cultivates  a  small  farm, 
must  lose  a  great  deal  of  time  in  passing  from  his  loom  to 
the  field,  and  from  the  field  to  his  loom.  When  the  two 
trades  can  be  carried  on  in  the  same  work-house,  the  loss 
4* 


42  POLITICAL    ECONOMY. 

of  time  is  no  doubt  less.  It  is  even  in  this  case,  howev- 
er, very  considerable.  A  man  commonly  saunters  a  little 
in  turning  his  hand  from  one  sort  of  employment  to  another. 
When  he  first  begins  the  new  work,  he  is  seldom  very 
keen  and  hearty  ;  his  mind,  as  they  say,  does  not  go  to  it, 
and  for  some  time  he  rather  trifles  than  applies  to  good 
purpose." 

Division  of  labor,  still  further,  leads  to  improved  and 
abridged  methods  of  performing  different  productive  ope- 
rations. When  the  attention  of  a  laborer  is  directed  to 
one  simple  process,  he  is  very  likely  to  hit  on  some  im- 
provement in  the  mode  of  performing  it.  In  this  way, 
important  inventions  in  the  arts  are  made,  and  the  aids  of 
nature  variously  applied  in  the  different  forms  of  labor-sa- 
ving machines.  The  history  of  inventions  tells  us,  that  a 
large  proportion  of  inventions  in  the  different  arts  have 
been  thus  introduced.  In  connexion  with  this  arrange- 
ment of  division  of  labor,  are  also  found  classes  of  labor- 
ers, whose  employment  it  is,  to  exert  their  ingenuity  and 
their  skill  in  contriving  and  constructing  machinery  of  va- 
rious kinds.  There  are  those  too,  who,  as  natural  philo- 
sophers, are  engaged  in  the  investigation  of  the  laws  of 
nature,  discovering  the  properties  of  material  objects,  and 
unfolding  to  the  view  of  men  the  mysterious  agencies  of 
the  natural  world. 

These  three  causes  then,  the  increased  dexterity  and 
skill  of  laborers — the  saving  of  time  and  the  discovery  and 
invention  of  improved  methods  of  conducting  processes  in 
production,  account  for  the  benefits  which  result  from  divis- 
ion of  labor.  But  it  may  be  asked,  if  there  are  not  limits, 
to  which  this  system  may  be  carried,  as  an  economical  ar- 
rangement.    There  are  limits,  and  obvious  ones.  Division 


I 


ECONOMICAL    ARRANGEMENTS.  43 

of  labor  is  profitable  from  the  increased  amount  of  products 
which  attend  it,  no  further  than  there  is  a  demand,  or  vent, 
for  these  products.  It  would  be  a  source  of  loss  to  those 
employed  in  the  manufacture  of  calico,  if  by  carrying  divis- 
ion of  labor  to  a  great  degree  of  minuteness,  they  should 
manufacture  daily  ten  thousand  yards  of  calico,  when  there 
is  a  sale  for  only  half,  or  three  fourths,  of  this  amount.  And 
here  is  one  reason,  why  in  the  mechanical  arts,  and  in  com- 
mercial employments,  division  of  labor  is  found  to  so  small 
an  extent  in  newly  settled  and  thinly  inhabited  countries. 
There  is  not  sufficient  demand  for  one  kind  of  labor,  to 
give  employment  to  a  single  laborer ;  — hence  the  same  in- 
dividual is  often  obhged  to  unite  two  or  three  kindred  arts. 
Here  also  is  a  reason,  why  division  of  labor  cannot  be  in- 
troduced to  the  same  extent  in  agriculture,  as  in  the  other 
branches  of  production.  Agricultural  products  are  for  the 
most  part  bulky  and  perishable.  They  are  with  difficul- 
ty transported  to  a  distance,  and  can  be  kept  on  hand  but 
for  a  short  time  ;  hence  the  market  for  them  is  limited. 
Manufactured  products,  on  the  contrary,  are  much  more 
permanent  in  their  existence,  and  can  generally  be  trans- 
ported with  ease  to  any  part  of  the  world. 

Another  limit  to  division  of  labor  as  an  economical  ar- 
rangement, is  found  in  the  amount  of  capital  required.  In 
proportion  to  the  degree  of  minuteness,  to  which  division 
of  labor  is  carried  in  any  establishment,  must  the  amount 
of  capital  be  enlarged.  This  also  is  seen  in  manufactures 
more  fully  than  in  the  other  forms  of  industry.  The 
greater  the  number  of  parts  into  which  the  process  of  man- 
ufacturing an  article  is  divided,  the  more  machinery  must 
there  be  ; — a  larger  amount  of  materials  for  manufacture 


44  POLITICAL  ECONOMY. 

must  also  be  kept  on  hand,  and  more  must  be  paid  in  the 
form  of  wages  to  laborers.  These  different  items  require 
productive  capital  for  their  supply  ;  and  as  capital  is  in 
its  nature  limited,  here  also  exists  a  limit  to  division  of 
labor. 

A  third  economical  arrangement  connected  with  produc- 
tion, remains  to  be  exhibited.  It  is  the  system  of  barter 
or  exchange. 

Adam  Smith  says,  that  there  is  in  man  a  "  natural  pro- 
pensity to  truck,  barter  and  exchange  one  thing  for  anoth- 
er." The  correctness  of  this  opinion  may  perhaps  be 
questioned,  but  it  is  certain,  that  men  have  strong  desires 
to  possess  objects  of  value,  and  that,  if  they  cannot  obtain 
the  objects  of  their  desires  in  a  more  ready  and  direct 
way,  they  will  resort  to  exchange  or  barter.  "  Give  me 
that  which  I  want,  and  you  shall  have  this  which  you 
want,"  says  the  same  author,''  is  the  meaning  of  every  of- 
fer to  bargain  ;  and  it  is  in  this  way,  that  we  obtain  from 
one  another  the  far  greater  part  of  those  good  offices 
which  we  stand  in  need  of.  It  is  not  from  the  benevo- 
lence of  the.  butcher,  the  baker,  or  the  brewer,  that  we 
expect  our  dinner,  but  from  their  regard  to  their  own  in- 
terest. We  address  ourselves,  not  to  their  humanity,  but 
to  their  self-love :  and  never  talk  to  them  of  our  own  ne- 
cessities, but  of  their  advantages." 

This  is  a  simple  and  natural  explanation  of  barter, 
and  if  we  look  at  a  community  in  its  advanced  state,  we 
find,  that  what  may  be  called  a  system  of  barter,  is  in  full 
operation.  Every  producer,  to  a  greater  or  less  degree, 
in  determining  his  employment  and  pursuits,  is  looking  at 
the  market — he  is  preparing  that  which  he  may  offer  to 


ECONOMICAL  ARRANGEMENTS.  45 

Others,  to  receive  from  them  in  return  the  commodities 
which  he  needs  ;  and  it  is  in  this  way  that  a  large  propor- 
tion of  the  wants  of  men  are  suppHed. 

In  thus  speaking  of  a  system  of  barter  as  existing  in  a 
community,  it  is  simply  meant,  that  there  exists  to  all 
practical  purposes  an  arrangement  of  this  kind — a  great 
extensive  plan  for  the  supply  of  the  wants  of  the  national 
family.  To  one  looking  on,  it  would  seem,  that  one  class 
of  men  had  been  appointed  to  furnish  food  for  this  great 
family — another  to  manufacture  cloth  of  different  textures 
— another  to  build  houses,  and  still  another  to  furnish  these 
houses  with  different  articles  of  convenience  and  comfort. 
But  in  truth  no  such  settled  arrangement  exists  ;  all  these 
results  follow  without  any  concert  upon  the  subject,  from 
the  single  principle  of  selfishness — because  each  one  is 
seeking  his  own  good.  And  it  is  found  perfectly  safe  to 
calculate  and  rely  on  the  operation  of  this  principle. 
Does  it  ever  happen,  that  on  any  day  there  is  not  found 
in  our  large  cities  what  is  necessary  to  feed  their  nume-- 
rous  inhabitants  ?  But  nobody  sees  to  it,  that  this  supply 
shall  be  brought  to  market.  It  is  thought  safe  to  leave  the 
whole  business  to  individual  interest ;  and  there  is  nothing 
lacking. 

That  the  arrangement  here  brought  to  view,  is  attended 
with  important  consequences,  as  it  promotes  production  and 
increases  the  wealth  of  a  nation,  will  now  be  shewn.  It  is 
so,  as  connected  with  division  of  labor,  the  advantages  of 
which  have  just  been  stated.  Were  it  not  for  this  extend- 
ed system  of  exchange,  no  vent  could  be  found  for  the  in- 
creased amount  of  products  which  result  from  that  econo- 
mical arrangement.  But  on  this  topic  enough  has  been 
said,  and  there  are  other  views,  which  may  here  be  pre- 


46  POLITICAL    ECONOMY. 

sented.  By  this  system  of  exchange,  existing  as  it  does 
between  individual  members  of  the  same  neighborhood — 
between  the  country  and  the  town — between  one  section 
of  national  territory  and  another,  and  between  different  na- 
tions of  the  earth,  the  various  powers  of  production  through- 
out the  civilized  world,  wherever  they  may  exist,  or  by 
whomsoever  they  may  be  possessed,  are  brought  into  ad- 
vantageous action.  And  further,  each  individual  mem- 
ber of  the  community,  is  thus  enabled  to  participate  in  the 
advantages  for  production,  found,  not  only  in  his  own  vi- 
cinity and  in  his  own  nation,  but  in  any  portion  of  the 
whole  circle  of  civilized  and  commercial  nations.  To  il- 
lustrate these  positions,  the  view  may  first  be  limited  to  a 
neighborhood.  Here  are  individuals  possessing  produc- 
tive capital  to  a  large  amount — others  are  landholders,  and 
many  have  no  capital  and  no  land,  but  they  have  strength 
and  intelligence.  Now  that  this  neighborhood  may  thrive, 
there  must  be  a  joint  action.  The  capitalists  must  bring 
forward  their  wealth  to  the  work  of  production — the  land- 
holder must  permit  his  fertile  acres  to  be  cultivated,  and 
these  laborers  must  engage  readily  in  the  work.  But  how 
is  this  result  to  be  attained.  It  is  by  placing  before  each 
class  motives  addressed  to  its  self  interest ;  and  this  is  ef- 
fected by  the  system  of  barter  we  are  considering.  Give, 
and  I  will  give  you  in  return,  is  the  language  addressed  to 
each  class.  And  it  is  language  which  is  listened  to, — all 
come  forward  with  the  resources  at  their  disposal,  to  as- 
sist in  the  great  work  of  production,  being  assured,  that  in 
proportion  to  what  they  contribute,  will  be  the  returns, 
which  each  shall  receive.  And  when  this  joint  action  is 
thus  effected,  the  laborer  participates  in  the  assistance,  de- 
rived from  the  productive  capital  of  the  rich,  and  from 


ECONOMICAL    ARRANGEMENTS.  47 

the  lands  of  the  owner  of  territory ;  while  both  these 
classes  derive  important  benefits  from  the  laborer  in  re- 
turn, and  also  mutual  advantages  from  each  other. 

Extend  now  the  view  to  the  town  and  the  surround^ 
ing  country.  Each  has  its  advantages  for  production. 
One  possesses  a  large  amount  of  productive  capital,  and  a 
commodious  harbor,  and  is  connected  by  commerce  with 
remote  countries,  thus  introducing  a  supply  of  various  for- 
eign commodities,  at  the  lowest  rates  for  which  they  can 
be  furnished.  The  other  has  its  fertile  and  highly  culti- 
vated soil,  yielding  rich  returns  to  agricultural  industry. 
The  system  of  exchange  is  established,  and  each  thrives, 
not  at  the  expense  of  the  other,  but  from  the  aid  mutual- 
ly given,  and  the  stimulating  influence  exerted.  Thus, 
too,  each  member  of  the  crowded  city  participates  in  the 
benefit  of  the  fertile  territory  around  him,  and,  in  return, 
each  inhabitant  of  this  surrounding  territory,  is  enabled  to 
avail  himself  of  the  large  capital,  and  of  the  advantages 
for  commerce,  which  the  city  possesses. 

Look  next  at  different  sections  of  a  country.  Each 
has  its  peculiar  advantages.  Those  of  one  section  are  fa- 
vorable to  the  production  of  one  kind  of  products  ;  those 
of  another  section  to  the  production  of  a  different  kind. 
But  to  develope  these  sectional  advantages,  there  must  be 
commercial  intercourse  between  these  two  parts  of  tlie 
country.  In  the  United  States,  for  example,  the  South, 
from  its  climate  and  its  soil,  is  adapted  to  the  raising  of 
cotton— the  North,  from  its  water  privileges,  the  charac- 
ter and  number  of  its  laborers,  and  the  large  amount  of  its 
productive  capital,  can  profitably  engage  in  the  manufac- 
ture of  this  cotton.  Thus  the  basis  for  exchange  exists, 
and  as  the  arrangement  is  introduced,  mutual  benefits 


48 


POLITICAL  ECONOMY. 


arise.  The  inhabitant  of  the  Northern  State  has  about 
him  more  comforts,  his  labor  turns  to  better  account,  and 
his  condition  in  hfe  is  improved,  because  in  the  Southern 
section  of  his  country,  facilities  are  found  for  the  raising  of 
cotton.  And  so,  in  return,  the  Southerner  feels  the  ben- 
efit of  the  water  privileges,  the  numerous  and  skilful  la- 
boring population,  and  the  large  productive  capital  of  the 
North. 

There  remains  one  other  view — the  system  of  barter 
between  different  nations,  to  which  the  term  foreign  com- 
merce is  applied.  The  basis  of  exchange  here,  is  the 
same,  as  is  the  foundation  of  commercial  intercourse  be- 
tween different  sections  of  the  same  country  ;  but  the  di- 
versities of  soil  and  climate  and  of  other  territorial  advan- 
tages, are  still  more  striking  and  important.  Some  pro- 
ducts, which  men  are  wont  to  look  upon  as  among  the 
necessaries  of  civilized  life,  can  be  raised  only  on  particu- 
lar portions  of  the  earth's  surface.  Or  if,  by  artificial 
means,  a  forced  growth  is  attempted  in  other  regions,  the 
supply  obtained  is  scanty  in  amount  and  inferior  in  its 
quality.  This  remark  applies  to  the  tea  and  coffee  plants, 
the  fruits  of  which  are  in  so  common  use.  Diversities  in 
other  aids  to  production — in  capital  and  in  labor,  are  also 
found  to  a  greater  extent  between  different  nations,  than 
between  different  sections  of  the  same  nation.  Illustra- 
tions of  these  statements  are  familiar  to  all. 

The  advantages  derived  from  foreign  commerce  are 
brought  to  view  in  another  part  of  this  work.  It  is  unne- 
cessary therefore  to  make  an  enumeration  of  them  here. 
So  far  as  they  are  connected  with  the  production  of  wealth, 
they  are  the  same  in  their  nature,  as  those  that  arise  from 
/^  the  intercourse  between  different  sections  of  the  same 


ECONOMICAL  ARRANGEMENTS.  49 

country.  There  is  the  same  stimulating  effect  exerted 
upon  the  productive  energies  of  different  nations,  and  the 
same  widening  of  the  field,  from  which  wealth  may  be  ob- 
tained. It  may  here  also  be  further  added,  that  this  ar- 
rangement is  highly  important  to  nations,  as  it  supplies  any 
deficiency  in  their  facilities  for  production,  whether  this  de- 
ficiency be  temporary  and  accidental,  or  whether  it  be  of  a 
more  permanent  nature.  A  country  may  have  been  de- 
populated by  some  wasting  sickness,  or  by  war,  or  from 
the  latter  of  these  desolating  and  impoverishing  causes,  it 
may  have  become  destitute  to  a  great  extent  of  productive 
capital,  or  its  soil  may  be  sterile,  or  it  may  to  an  unusual 
degree  be  destitute  of  water-power,  and  other  advantages 
for  manufactures.  Now  unless  in  some  way  these  defi- 
ciencies can  be  supplied,  such  nations,  though  they  may 
possess  other  advantages  for  production  to  an  unusual  de- 
gree, must  suffer  great  inconveniences  and  privations,  and 
can  never  attain  to  wealth  and  prosperity,  until  these  cau- 
ses of  embarrassment,  so  far  as  they  are  temporary,  are  re- 
moved. The  system  of  exchange  between  nations  comes 
to  their  relief,  and  thus  tends  to  equalize  the  condition  of 
civilized  man  throughout  the  world. 

The  three  great  economical  arrangements,  that  have  now 
been  brought  to  view,  existing  as  they  do  together,  and  in 
joint  operation,  go  far  in  accounting  for  the  abundant  sup- 
plies and  the  great  amount  of  wealth,  possessed  by  the  civ- 
ilized nations  of  the  earth.  Viewed  as  a  whole,  they  may 
be  said  to  constitute  the  management,  under  which  na- 
tions grow  up  to  greatness  and  wealth.  There  are  indeed 
other  minor  arrangements  ;  but  these  will  be  found  to  be 
parts  of  the  system,  which  has  been  exhibited,  tending  to 
the  same  result  of  national  prosperity. 
5 


50 
CHAPTER  III. 

Human  Industry. 

In  preceding  chapters,  the  great  sources  of  national 
wealth,  and  the  economical  arrangements,  by  the  aid  of 
which  the  work  of  production  is  most  advantageously  con- 
ducted, have  been  brought  to  view.  It  is  now  proposed 
to  look  at  human  industry — at  the  aids  to  production  fur- 
nished by  nature,  and  at  productive  capital,  separately, 
that  we  may  learn,  under  what  circumstances  the  highest 
benefits  may  be  derived  from  each  of  these  sources  of  na- 
tional wealth.  In  this  survey,  opportunities  will  occur  for 
the  discussion  of  many  questions  of  a  practical  nature,  and 
for  the  developement  of  important  principles  in  the  science. 

Few  form  any  just  conception  of  what  is  effected  in  a 
large  and  industrious  community,  by  human  labor.  The 
products  of  labor  are  looked  upon  so  much  in  detail,  and 
as  connected  with  the  exertions  and  rewards  of  individual 
laborers,  that  no  strong  impression  is  made  upon  the  mind. 
It  would  perhaps  be  surprising  to  some,  who  are  wont  to  at- 
tach much  importance  to  the  aids  of  nature,  and  to  capi- 
tal, as  they  are  seen  in  the  imposing  forms  of  large  man- 
ufacturing and  commercial  establishments,  to  learn,  that  it 
has  been  estimated,  that  three  fourths  of  the  revenue  of 
even  manufacturing  and  commercial  communities,  are  de- 
rived from  human  industry.  But  though  it  is  difficult  to 
make  any  just  estimate,  or  to  form  any  distinct  conceptions 
of  the  results  of  human  industry  in  a  large  and  populous  na- 
tion, we  may  make  some  approximation  to  a  correct  esti- 


HUMAN    INDUSTRY.  51 

mate,  and  aid  our  conception,  by  looking  at  a  single  town 
or  village.  Suppose  a  town  to  contain  1000  effective  la- 
borers of  every  kind,  and  that  we  allow  fifty  cents  per  day, 
as  the  average  value  of  labor,  computing  280  laboring  days 
in  the  year.  The  revenue  of  these  laborers  then  is  $500 
per  day,  and  $140,000  per  annum.  No  doubt  there  are 
many  towns  in  our  country  of  three  or  four  thousand  in- 
habitants, whose  revenue  from  labor  equals  or  exceeds  this 
amount.  It  is  true,  that  a  large  proportion  of  this  revenue  is 
consumed  in  supplying  the  daily  wants  of  these  laborers  and 
their  famihes,  but  this  circumstance  does  not  affect  the  cor- 
rectness of  our  calculations  as  to  the  results  of  human  in- 
dustry. Now  extend  this  view  to  our  nation,  in  which  are 
found  two  or  three  millions  of  productive  laborers.  How 
immense  the  revenue  from  all  this  labor  !  and  how  impor- 
tant is  this  source  of  national  wealth  1 

Another  view  of  human  industry,  which  tends  to  im- 
press the  mind  with  a  sense  of  its  importance  and  extent, 
relates  to  the  variety  of  forms,  in  which  it  appears.  Men- 
tion has  been  made  of  the  division  of  labor  generally,  and 
also  of  the  three  great  branches  of  human  industry,  Agri- 
culture, Manufactures  and  Commerce.  But  in  each  of 
these  departments,  especially  in  the  two  last,  are  found  di- 
visions and  sub-divisions  to  an  almost  endless  extent. 
There  is  also  the  labor  of  the  mind,  as  well  as  the  labor 
of  the  body — the  thousands  employed  in  planning,  ar- 
ranging and  conducting  the  different  processes  of  produc- 
tion, and  the  millions  who  carry  these  plans  into  execu- 
tion. It  is  by  dwelling  on  a  view  like  this,  that  we  ob- 
tain some,  though  a  confused  idea,  of  the  variety  of  forms, 
which  human  industry  assumes.  And  when  we  have 
followed  out  the  division  of  labor  to  these  minute  divisions 


52  POLITICAL    ECONOMY. 

and  sub-divisions  and  ramifications,  we  find  bursting  forth 
and  attendant  upon  them,  the  unnumbered  Httle  rills  of 
wealth,  which,  flowing  together,  form  the  larger  streams, 
and  empty  themselves  into  the  great  ocean  of  national 
opulence. 

Such  then  being  the  extent  and  importance  of  human 
industry  as  a  source  of  wealth,  whatever  affects  its  devel- 
opement,  increasing  or  impairing  its  efficiency  and  amount, 
must  be  closely  connected  with  the  prosperity  of  a  na- 
tion. Some  causes  thus  affecting  human  industry,  will 
now  be  stated. 

1.  Personal  freedom,  or  that  every  man  be  permitted 
to  labor  for  his  own  benefit,  and  in  that  way  which  he  es- 
teems most  advantageous  to  himself,  conduces  much  to 
the  efficiency  of  human  industry,  as  one  of  the  sources  of 
national  wealth.  The  only  limitation  to  this  personal 
freedom  which  should  exist,  is,  that  an  employment  be 
not  detrimental  to  the  public  good.  So  far,  restraint  is 
implied  in  the  constitution  of  civil  society. 

To  see  the  importance  of  personal  freedom  as  it  affects 
human  labor,  the  industry  of  a  slave  population  may  be 
compared  with  that  of  a  community  of  freemen.  It  is  of- 
ten said,  that  more  work  is  done  in  the  same  time  by  ten 
New  England  farmers,  than  by  twice  that  number  of 
Southern  slaves.  Indeed  it  is  sometimes  acknowledged 
by  Southern  slave-holders  themselves,  that  it  would  be 
for  their  interest,  to  hire  free  white  laborers,  and  pay  them 
liberal  wages,  rather  than  be  at  the  expense  of  support- 
ing their  slaves,  including  childhood  and  ago, — few  and 
cheaply  supplied  as  the  wants  of  these  slaves  are.  Now 
this  difference  does  not  arise  wholly  from  a  difference  in 
the  physical  powers  of  slaves  and  freemen.     The  slave, 


HUMAN  INDUSTRY.  53 

being  compelled  to  work  for  the  benefit  of  another,  and 
in  that  way  which  another  prescribes,  has  no  fondness  for 
his  employment,  and  no  motive  to  exertion.  The  latter 
knows,  that  the  amount  to  be  received  for  his  labor  will  be 
in  direct  proportion  to  his  efforts  ;  or  if  he  is  laboring  for 
another,  to  receive  a  stipulated  reward,  he  still  is  con- 
scious, that  his  reputation  as  a  laborer,  and  connected 
with  it,  his  success  in  life,  are  concerned.  He  puts  forth 
therefore  strenuous  and  unremitted  efforts  in  his  chosen 
employment.  Free  labor  is  also  ordinarily  performed 
with  more  skill  than  slave  labor.  It  is  a  matter  of  public 
policy  in  free  communities  to  enlighten  the  free  laborer, 
and  in  slave  communities,  to  keep  the  slave  in  ignorance. 
The  former  is  generally  a  man  of  contrivance  and  reflec- 
tion ;  the  latter  is  dull  and  stupid.  Now  every  one 
knows,  that  even  in  the  common  employments  of  life — the 
simple  operations  of  agricultural  industry,  for  example, 
much  advantage  arises  from  skill  and  ingenuity.  One 
man  hoes  a  hill  of  corn  in  less  time  and  in  a  better  manner 
than  another,  simply  because  he  has  more  skill,  and  labors 
to  better  advantage.  Much  more  is  this  the  case  in  the 
complicated  processes  of  manufacturing  labor.  Hence, 
no  doubt,  the  impression,  which  is  probably  correct,  that 
slaves  cannot  be  advantageously  employed  in  manufac- 
tures. 

But  it  is  sometimes  the  case,  that  other  restraints  are 
placed  on  human  industry,  little  less  injurious  than  those 
of  absolute  slavery.  In  som^  nations,  and  those  too  ac- 
counted free,  laws  and  regulations  and  institutions  exist, 
which  exert  a  similar  influence.  In  English  statute  books, 
are  found  acts  of  Parliament,  fixing  the  amount,  which  la- 
borers of  different  trades  and  employments  should  receive 
5* 


54  POLITICAL    ECONOMY. 

for  their  labor.  Especially  have  measures  of  this  kind 
been  resorted  to,  both  in  England  and  in  other  European 
nations,  when,  from  famine  or  some  wasting  pestilence, 
the  number  of  efficient  laborers  has  been  reduced,  and  the 
consequent  demand  for  laborers  has  tended  to  raise  the 
rates  of  wages.  The  effects  of  legislative  enactments  of 
this  kind  were  soon  seen.  Laborers  were  unwilling  to 
work,  unless  compelled  by  the  authority  of  the  State,  or 
by  absolute  necessity.  And  when  engaged  in  labor,  they 
felt  no  motive  leading  them  to  constant  and  vigorous  ex- 
ertion, but  made  the  amount  of  their  labor  to  correspond 
to  the  pittance  they  received.  Here  then  was  a  check  to 
industry.  Men  were  not  permitted  to  labor  for  their  own 
benefit  without  restraint,  and  as  a  necessary  consequence 
less  work  was  done — less  wealth  produced  in  the  nation. 
English  history  also  tells  us  of  chartered  and  privileged 
companies,  under  whose  direction  the  different  arts  and 
trades  were  practised  ;  and  all  persons  were  forbidden  to 
practise  these  arts  and  trades,  unless  they  possessed,  what 
was  termed  the  freedom  of  the  trade.  These  corpo- 
rations also  made  by-laws  and  regulations,  such  as  they 
saw  fit  to  make — many  of  which  were  in  the  highest  de- 
gree arbitrary  and  oppressive.  The  professed  design  of 
these  regulations,  was  to  prevent  persons  from  practising 
a  trade,  with  which  they  were  not  sufficiently  acquainted. 
The  real  purpose  was  to  prevent  competition  in  man- 
ufacturing the  articles  of  the  trade,  and  thus  to  secure 
to  the  company  higher  prices. 

One  class  of  these  regulations,  which  may  serve  as  an 
example  of  the  whole,  are  the  laws  of  apprenticeship. 
No  man  was  permitted  to  bind  his  son  as  an  apprentice  to 
any  trade,  who  was  not  possessed  of  an  income  of  twenty 


HUMAN  INDUSTRY.  55 

shillings  a  year  from  land.  Masters  also  were  limited  as 
to  the  number  of  apprentices  they  might  receive.  Large 
sums  were  also  demanded  from  parents  as  fees  of  appren- 
ticeship, and  a  long  term  of  service  required.  Obstacles 
were  thus  thrown  in  the  way  of  those  desirous  of  learning 
to  practise  the  different  arts,  and,  as  a  consequence,  the 
number  of  useful  laborers  in  the  community  was  less. 

That  all  regulations  of  this  nature,  with  an  exception 
hereafter  to  be  stated,  are  unnecessary  and  injurious,  be- 
ing detrimental  to  the  public  good,  and  often  oppressive 
to  individuals,  may  easily  be  shewn.  They  are  unneces- 
sary. Their  professed  design,  as  already  stated,  is  to  se- 
cure the  public  against  fraud  and  loss,  arising  from  the 
want  of  fidelity  and  skill  in  those  who  practise  the  differ- 
ent trades  and  arts.  But  the  public  is  not  exposed  to 
imposition  and  loss  from  this  source,  to  an  extent  which 
requires  such  interference.  In  respect  to  those  articles 
of  production,  which  are  submitted  to  the  inspection  and 
examination  of  consumers,  and  of  the  quality  of  which 
most  men  are  fully  capable  of  determining,  it  is  safe,  to 
leave  it  to  those  who  purchase,  to  judge  for  themselves. 
If  the  work  is  executed  in  an  awkward,  bungling  manner, 
the  want  of  skill  will  at  once  be  detected,  and  the  produ- 
cer will  hilve  his  product  left  on  his  hands,  being  subjected 
to  the  loss,  both  of  his  labor  and  his  materials.  If  there  is 
designed  deception,  it  will  of  course  eventually  be  discov- 
ered, and  the  producer  will  lose  both  his  character  and 
his  business.  On  the  part  of  the  consumer,  also,  there 
will  be  loss,  but,  in  most  instances,  it  will  be  small,  and 
will  lead  him  to  be  more  cautious  and  wary.  There  are 
however  some  few  instances,  and  these  form  the  exception 
before  referred  to,  in  which  some  restraints,  of  the  nature 


'56  POLITICAL   ECONOMY. 

of  those  we  are  considering,  may  with  advantage  be  impo- 
sed. Such  instances  relate  to  those  commodities,  of  whose 
quality  consumers  are  not  capable  of  judging,  and  the  test- 
ing of  which  might  be  attended  with  serious  consequences 
to  those  making  the  experiment.  The  trade  of  the  apoth- 
ecary, in  which  it  is  required  to  compound  and  prepare 
different  medicines,  is  an  example  of  this  kind.  In  such 
instances,  the  public  may  wisely  require  apprenticeship, 
or  that  in  some  other  way,  consumers  be  secured  against 
'    injury  and  loss. 

But  it  is  not  only  the  case,  that  the  restraints  on  indus- 
try we  are  considering,  are  unnecessary  and  injurious  to 
the  public  ;  they  are  also  oppressive  to  individuals. 

It  often  happens,  that  from  the  original  constitution  of 
,  the  mind,  or  from  some  early  bias,  connected  with  the 
f  r  j  circumstances  in  which  individuals  have  been  placed,  there 
is  a  peculiar  fondness  and  aptitude  for  some  employment. 
Now  should  these  individuals  be  permitted  to  engage  in 
their  favorite  pursuits,  they  might  highly  benefit  them- 
selves, and  do  essential  service  to  the  public.  But  it  may 
be,  that  the  father  of  such  an  individual  is  a  poor  man,  and 
possesses  no  land,  from  which  a  revenue  of  twenty  shillings 
is  derived,  or  it  may  not  be  convenient  to  serve  a  long  ap- 
prenticeship, and  to  incur  the  expense  required  to  obtain 
the  freedom  of  the  trade. 

Another  case  may  be  stated.  In  the  extent  to  which 
division  of  labor  is  carried  in  some  of  the  arts,  it  often 
happens,  that  a  laborer  is  engaged  in  performing  one  of 
the  many  parts  of  some  process  of  production.  But  from 
some  cause,  there  ceases  to  be  a  demand  for  the  product, 
in  the  manufacturing  of  which  he  is  engaged,  and  he  is 
thrown  out  of  employment.     Now  might  he  be  permitted 


HUMAN  INDUSTRY.  57 

to  engage  in  some  kindred  art,  he  might  at  once  adapt 
himself  to  his  new  pursuit,  and  thus  neither  he,  nor  the 
public,  would  suffer  loss  from  the  suspension  of  his  labors. 
But  this  the  laws  of  trade  corporations  forbid. 

In  both  these  instances,  certainly,  and  in  others  of  a  sim- 
ilar nature,  the  restraints  imposed  are  injurious  and  oppres- 
sive. 

The  position  to  be  maintained  on  this  subject  is  the  fol- 
lowing :  That  with  the  exception  which  has  been  made, 
the  practice  of  the  different  trades,  should  be  open  to  all, 
with  no  other  restriction  or  security  for  the  public,  than 
what  a  fair,  and,  as  it  will  generally  happen,  a  close  com- 
petition, will  produce.  In  this  way,  the  interest  and  the 
rights,  both  of  the  public  and  of  individuals,  will  best  be 
secured. 

Such  is  practically  the -course  adopted  in  our  own  coun- 
try. We  have,  it  is  true,  laws  pertaining  to  apprentice- 
ships, but  except  in  special  cases,  not  requiring  them. 
When  engagements  of  this  kind  have  been  made,  the  law 
comes  in  for  their  regulation,  to  the  mutual  security  and 
benefit  of  the  master  and  apprentice  ;  and  this  is  all  that  it 
does.  Any  man  may  offer  his  services  to  the  public  as  a 
cabinet-maker,  or  as  a  carpenter,  or  a  watchmaker,  or  in 
any  of  the  common  employments  of  life  ;  but  in  so  doing 
he  must  enter  the  lists  as  a  competitor  with  others,  who  are 
engaged  in  the  same  pursuit.  If  he  is  ignorant  of  his  pro- 
fessed business  and  unskilful,  the  public  will  soon  know  it, 
and  he  himself  will  also  learn  the  folly  of  his  attempt  to 
his  cost. 

The  English  system  of  poor  laws  furnishes  another  in- 
stance of  restraint  on  human  labor,  injurious  to  the  public 
and  oppressive  to  individuals.     As  towns  are  bound  to  sup- 


58  POLITICAL    ECONOMY. 

port  their  own  paupers,  each  town  endeavours  to  prevent 
individuals  and  families,  that  are  not  possessed  of  wealth, 
from  gaining  a  residence  within  its  limits.  Hence  many- 
laws  and  regulations  exist,  which  are  designed  to  prevent 
the  poor,  however  honest  and  industrious,  from  obtaining  a 
settlement ;  and  these  laws  are  executed  with  great  strict- 
ness and  rigor.  In  our  own  country,  if  a  man  cannot  find 
employment  and  a  livehhood  in  one  town,  he  removes  to 
another,  and  again,  if  a  more  alluring  prospect  opens  be- 
fore him,  he  hesitates  not  to  make  a  second  removal.  But 
to  the  poor  in  England,  this  is  in  effect  forbidden.  No  mat- 
ter how  discouraging  may  be  the  circumstances  in  which 
a  man  may  find  himself,  or  what  obstacles  may  oppose  them- 
selves to  his  enterprise  and  industry,  if  he  is  poor,  it  is  not 
permitted  to  him  to  go  where  he  may  be  surrounded  by 
different  circumstances — where  his  enterprise  may  be  suc- 
cessful, and  his  industry  meet  its  reward.  He  must  drag 
out  a  miserable  existence  in  the  spot,  which  gave  him  birth. 
Such  cruel  and  unjust  regulations  must  be  severe  checks 
on  human  industry. 

On  the  subject  of  personal  freedom  in  connexion  with 
labor,  the  following  short,  but  sententious  extract  from 
the  Wealth  of  Nations,  contains  a  correct  and  important 
sentiment.  "  The  property,  which  every  man  hath  in  his 
own  labor,  is  most  sacred  and  inviolable.  The  patrimo- 
ny of  a  poor  man  lies  in  the  strength  and  dexterity  of  his 
hands  ;  and  to  hinder  him  from  employing  that  strength 
and  dexterity,  in  that  manner  which  he  thinks  proper, 
without  injury  to  his  neighbor,  is  a  plain  violation  of  this 
most  sacred  property.  The  interposition  of  the  lawgiver 
is  impertinent  and  oppressive," 


HUMAN  INDUSTRY.  59 

2.  Labor  becomes  more  efficient  in  the  production  of 
wealth,  when  it  receives  a  suitable  reward. 

Labor  implies  a  sacrifice  of  ease,  and  wearisome  and 
sometimes  painful  eiFort.  To  lead  men  to  make  this  sa- 
crifice, and  put  forth  these  efforts,  some  strong  inducement 
must  be  placed  before  them.  In  the  savage  state,  the  ob- 
taining of  food  and  of  shelter,  is  the  motive  to  exertion, 
and  when  these  urgent  wants  are  supplied,  the  savage  re- 
turns to  a  state  of  inaction.  The  same  wants  are  to  be 
supplied,  and  better  supplied,  in  civilized  life.  But  here 
other  inducements  to  labor  exist.  In  civihzed  communi- 
ties, are  different  ranks — the  distinctions  of  wealth  and 
of  power  are  known,  and  men  are  continually  passing  from 
one  class  in  society  to  a  higher.  The  hope  then  of  bet- 
tering his  condition,  is  before  the  laborer.  He  is  prompt- 
ed to  continued  and  patient  effort,  that  he  may  acquire 
property,  and  have  around  him  an  abundance  of  the  com- 
forts and  conveniences  of  life,  and  thus  be  held  in  respect 
by  others. 

It  will  be  seen,  when  we  come  to  treat  of  the  distribu- 
tion of  wealth,  that  the  reward  of  the  laborer  is  received 
by  him  under  the  form  of  wages,  and  the  principles,  on 
which  the  rate  and  value  of  wages  depend,  will  then  be 
brought  fo  view.  In  the  present  connexion,  it  is  enough 
to  say,  that  the  remuneration  of  the  laborer  should  be  am- 
ple, affording  to  him  and  to  his  family  a  generous  support. 

This  is  important,  as  it  tends  to  increase  the  efficiency 
of  the  laborer.  In  most  employments,  the  ability  to  work, 
must  depend  on  the  health  and  vigor  of  the  body,  and 
these  circumstances  are  connected  with  a  generous  diet, 
and  the  enjoyment  of  the  comforts  and  necessaries  of  life. 
A  hardy,  healthy,  vigorous,  laboring  population,  is  an  irar 


®)  POLITICAL    ECONOMY. 

portant  contribution  to  the  wealth  of  a  nation,  and  such  a 
population  will  be  found  in  those  countries  only,  where 
the  style  of  living  of  this  class  of  the  community,  is  a  style 
of  comfort  and  abundance. 

A  liberal  remuneration  is  still  further  important,  as  it 
tends  to  make  willing  laborers.  Men  usually  exert  them- 
selves, in  proportion  to  the  reward,  they  are  to  receive. 
The  operation  of  this  principle  has  already  been  shewn, 
in  the  comparison  instituted  between  the  labor  of  slaves 
and  of  freemen.  But  of  those  accounted  free,  many  are 
so  situated,  that  the  only  motive  to  exertion  which  they 
feel,  is  the  strong,  compulsive  arm  of  necessity.  Some, 
by  their  utmost  efforts  from  day  to  day,  are  just  able  to 
obtain  a  supply  of  their  daily  returning  wants.  They 
struggle  against  a  strong  current,  not  daring  for  a  moment 
to  relax  their  efforts,  lest  they  should  be  borne  downwards 
to  destruction.  But  the  struggle  is  short,  and  the  labor- 
ers, whose  brief  existence  is  thus  a  succession  of  hardships 
and  privations,  are  soon  lost  to  the  community.  Others 
gain  a  bare  subsistence  more  easily  ;  but  these,  seeing  no 
prospect  before  them  of  improving  their  condition,  and  that 
the  most  they  can  hope  to  effect  by  their  labors,  is  to  live, 
conclude  that  their  wisest  course  is  to  live  with  as  little 
labor  as  possible,  and  thus  they  become  sluggish  and  in- 
dolent. Though  members  of  a  civilized  community,  in 
their  habits  of  industry,  they  much  resemble  the  savage, 
who  labors  only  when  roused  by  necessity  to  exertion. 
The  contrast  to  these  instances  is  striking,  where  laborers 
have  brighter  prospects  opened  before  them.  Not  only 
is  every  hour  improved,  but  all  the  operations  of  industry 
are  performed  with  cheerfulness,  and  with  greater  skill 
and  fidelity.     An  illustration  of  the  strength  and  power 


V  HUMAN  INDUSTRY.  61 

of  this  principle,  is  found  in  the  different  manner,  in  which 
common  day  labor  and  job-work  are  performed.  In  the 
former  case,  the  laborer  does  just  work  enough  to  satisfy 
his  employer,  and  earn  his  daily  wages  ;  in  the  latter,  he 
toils  till  he  is  satisfied  with  himself — that  is,  generally,  till 
his  exhausted  powers  will  enable  him  to  work  no  longer. 
Now,  when  the  situation  of  the  whole  laboring  part  of  a 
community  is  such,  that  each  one  feels  it  for  his  own  im- 
mediate interest  to  exert  himself,  turning  every  day  and 
hour  to  some  good  account,  the  results  will  shew  them- 
selves in  the  increasing  wealth  and  prosperity  of  the  na- 
tion. 

And  in  this  connexion  it  may  be  remarked,  that  every 
nation,  from  a  regard  to  its  internal  peace  and  quietness, 
is  deeply  interested  in  the  style  of  living  of  its  laboring 
population,  and  of  course  in  the  remuneration  received  for 
labor.  When  the  condition  of  laborers  is  one  of  comfort 
and  enjoyment,  they  are  wont  to  become  attached  to  the 
existing  state  of  things,  and  to  the  institutions  of  the  coun- 
try— they  feel  a  self  respect,  and  a  sense  of  individual  im' 
portance  and  responsibility.  Being  able  also  to  furnish 
themselves  with  the  means  of  improvement,  tind  to  allow 
themselves  time  for  the  use  of  these  means,  they  become 
intelligent  and  elevated  in  the  scale  of  being.  Thus  they 
are  enabled  to  form  some  opinion  of  the  wisdom  of  public 
measures  ;  and  being  led  to  see  that  their  own  safety  and 
prosperity  are  connected  with  the  public  welfare,  they  be- 
come valuable  citizens,  the  friends  and  supporters  of  order 
and  good  government.  But  when  the  condition  of  laborers 
is  one  of  hardships  and  privations,  with  no  bright  hopes  to 
cheer  and  animate  them,  the  reverse  of  what  has  been  sta-* 
ted  above  is  witnessed ;  scenes  of  violence  and  coiDmotion 
6 


62  POLITICAL  ECONOMY. 

are  often  witnessed,  and  the  materials  for  turmoil  and  rev-* 
olution  are  ever  found.  To  what  other  immediate  cause 
than  the  degraded  state  of  her  laboring  population,  are  we 
to  ascribe  the  unsettled  state  of  affairs,  with  which  Ireland 
has  been  so  long  visited.  In  that  unhappy  country,  from 
the  concurrence  of  unfavorable  causes,  the  rate  of  wages  is 
low,  while  there  is  a  scanty  supply  of  the  necessaries  of  life, 
in  proportion  to  the  wants  of  the  community.  Hence  the 
style  of  living  is  reduced  to  the  lowest  point  at  which  life 
can  be  sustained,  and  riot,  and  commotion,  and  idleness, 
and  misery  prevail.  When  too  we  look  at  England,  where 
the  state  of  the  laborer  is  more  elevated,  and  his  wants  far 
better  supplied,  there  is  also  found  in  the  subject  of  wages 
a  source  of  complaint  and  inquietude.  In  manufacturing 
towns,  a  "  strike,"as  it  is  there  termed,  or  a  turning  out  for 
higher  wages,  not  unfrequently  occurs,  and  such  events  are 
scenes  of  disorder,  and  sometimes  of  violence  and  blood- 
shed. They  are  evidence  of  dissatisfaction  on  the  part  of 
the  laborer  with  the  existing  state  of  things,  and  are  trou* 
blesome,  if  not  dangerous  to  the  public. 

The  reverse  of  all  this  is  seen  in  the  condition  of  the  la- 
boring population  in  our  own  country.  Here  the  remu- 
neration of  labor  is  ample,  and  the  style  of  living  which 
prevails  among  the  laboring  classes,  is  one  of  comfort  and 
abundance  ;  and  the  happy  effects  are  seen  in  the  charac- 
ter and  conduct  of  this  part  of  the  community. 

3.  The  sentiments,  habits,  institutions,  customs  and 
morals  of  a  nation,  all  exert  an  influence  on  labor,  as  a 
source  of  national  wealth,  A  few  instances  will  be  speci- 
6ed. 

In  some  countries,  it  is  thought  disreputable  to  labor. 
This  impression  is  common  in  those  nations,  where  a  no- 


HUMAN  INDUSTRY.  63 

bility,  or  any  privileged  orders,  are  found,  or  where  slave- 
ry exists,  or  where,  from  any  cause,  the  distinctions  of 
rank  are  strongly  marked.  Hence  in  such  nations,  there 
are  many  who  spend  their  days  in  absolute  idleness — the 
drones  of  society.  In  other  nations,  it  is  thought  honora- 
ble to  labor,  and  the  man  who  obtains  by  his  own  exer- 
tions a  support  for  himself  and  his  family,  is  on  this  ac- 
count regarded  with  respect.  The  influence  of  these  im- 
pressions will  be  seen  in  the  gross  amount  of  national  pro- 
ducts. 

Nations  also  differ  in  their  habits  of  industry.  Some 
communities,  either  from  constitutional  temperament,  or 
from  customs,  handed  down  from  generation  to  genera- 
tion, are  an  industrious  people.  There  seems  to  exist  in 
them  a  love  of  labor,  and  with  much  assiduity  and  toil, 
they  carry  forward  and  perfect  the  different  processes  of 
production,  in  which  they  engage.  There  are  other  na- 
tions, whose  habits  are  the  reverse  ;  they  are  indolent  and 
inefficient. 

The  time  spent  by  different  nations  as  holidays — days, 
when  labor  is  suspended  throughout  the  community,  is 
another  circumstance  of  sufficient  importance  to  be  men- 
tioned here.  Without  doubt,  some  seasons  of  this  kind 
may  advantageously  be  observed  by  every  people,  espe- 
cially when  they  are  of  a  nature  fitted  to  cherish  patriotic 
feelings,  or  to  promote  moral  and  religous  improvement. 
But  when,  as  in  Catholic  countries,  this  observance  of 
hohdays  is  carried  to  an  extent,  that  a  twelfth,  or  even  a 
larger  portion  of  the  year,  is  thus  spent  in  idleness  and 
pageantry,  the  loss  of  so  many  days  of  labor  becomes  a 
source  of  impoverishment  and  evil. 

An  unwise  system  of  poor  laws,  as  it  opens  the  way  to 


64  POLITICAL    ECONOMY. 

improvidence  and  idleness  and  vice,  may  also  exert  an 
injurious  effect  on  the  labor  of  a  nation.  And  so  of  all 
immoral  influences  and  habits,  leading  to  profligacy  and 
dissipation.  But  on  these  and  other  general  considera- 
tions, it  is  unnecessary  to  dwell. 

This  view  of  the  causes  affecting  labor  as  a  source  of 
national  wealth,  will  now  be  concluded  with  a  brief  state- 
ment of  the  different  ways,  in  which  the  government  of  a 
country  may  extend  its  assistance  to  this  class  of  its  citi- 
zens, and  improve  their  condition. 

1.  It  may  extend  to  the  laboring  population  full  and 
complete  security  in  the  enjoyment  of  their  rights  of  per- 
son and  of  property. 

2.  It  may  assist  to  enlighten  and  instruct  them.  These 
objects,  it  may  effect  by  the  dissemination  of  useful  knowl- 
edge, and  by  affording  encouragement  and  aid  to  educa- 
tion in  its  different  departments.  The  common  school 
system,  as  it  exists  at  the  present  time  in  New  England, 
sustained  and  supported  by  legislative  enactments,  is  an 
example  of  the  manner  in  which  assistance  of  this  kind 
may  be  given.  ^ 

3.  It  can  do  much  towards  producing  and  sustaining  a 
healthy  moral  condition  of  laborers. 

No  members  of  a  community  suffer  more  from  the 
prevalence  of  vicious  habits  and  practices,  than  laborers  ; 
especially  is  this  the  case,  where  there  is  a  propensity  to 
dissipation  in  any  form,  and  to  wasteful  excess.  It  be- 
comes then  the  duty  of  the  public  authorities  of  a  nation, 
as  guardians  of  the  public  welfare,  to  exert  themselves  in 
every  way  for  the  promotion  of  good  morals.  Something 
towards  this  important  object,  can  be  effected  by  direct 
legislative  enactments  for  the  prevention  and   suppres-* 


HUMAN    INDUSTRY.  66 

sion  of  vice,  in  some  of  its  most  prevailing  forms  ;  and  so 
far  as  such  acts  of  government  are  supported  by  public 
opinion,  the  strong  arm  of  authority  should  ever  be  put  forth 
in  the  cause  of  virtue.  But  there  are  indirect  ways,  in 
which  the  same  results  may  be  attained.  The  govern- 
ment of  a  country  may  give  its  sanction  and  aid  to  all  ju- 
dicious attempts  to  enlighten  and  influence  the  public 
mind,  in  what  pertains  to  the  moral,  and,  as  intimately 
connected  with  it,  to  the  religious  welfare  of  the  conmiu- 
nity.  Above  all,  it  should  ever  exert  its  commanding  in- 
fluence on  the  side  of  good  order  and  sound  morals. 


1  Ijibrmy. 


CHAPTER      ^ 

^^  CuItfOfnV* 

Natural  aids  to  Pt'oductionf^^^^^^^^::sz.v::::::^^ 

In  connexion  with  the  explanation  of  natural  agency 
and  other  natural  aids  to  production,  given  in  the  intro- 
ductory chapter,  it  was  remarked,  that  man  in  a  civilized 
community  avails  himself  of  these  aids  to  a  far  greater 
extent,  than  when  in  a  savage  state.  Indeed  the  difference 
between  these  two  states  of  society  as  to  the  comforts  and 
enjoyments  of  life,  is  in  no  small  degree  to  be  traced  to  this 
source.  Civilized  man,  it  is  true,  works  more  constant- 
ly ;  but  this  is  not  all — he  works  to  better  advantage. 

Every  one  knows,  that  the  returns  of  the  soil  under 
skilful  cultivation,  are  increased  many  fold.  Tracts  of 
land  in  this  country,  which  once  afforded  a  scanty  subsis- 
tence to  a  wandering  tribe  of  Indians,  now  yield  a  rich 
harvest  for  the  support  of  a  dense  population.  But  this 
6* 


66  POLITICAL  ECONOMY. 

increased  supply  does  not  arise  from  any  new  gifts  of  na- 
ture. There  existed  in  this  territory  the  same  natural 
agency  when  in  possession  of  its  former  inhabitants,  as  at 
present ;  but  this  natural  agency  needed  the  assistance  and 
guidance  of  man  to  develope  it  and  make  it  efficient. 

These  untaught  Indians,  also,  had  around  them  mate- 
rial objects,  with  the  same  properties  which  they  now 
possess — ^the  same  woods  in  the  forest,  the  same  ores  in 
the  earth.  But  they  knew  not  of  the  existence  of  these 
objects,  or,  if  they  knew  of  their  existence,  they  were  ig- 
norant of  their  useful  properties  and  how  to  avail  them- 
selves of  their  assistance.  Hence,  so  far  as  they  made  at- 
tempts to  avail  themselves  of  natural  assistants,  such  at- 
tempts were  rude  and  inefficient.  An  Indian  would  fur- 
nish himself  with  that  useful  implement — an  axe.  He 
selects  a  hard  stone,  and  by  long  continued  and  laborious 
friction,  he  gives  to  it  a  rude  form  and  an  imperfect  edge. 
He  then  selects  some  sapling  tree,  cuts  off  the  top  of  it, 
cleaves  the  trunk  and  inserts  his  axe.  The  parts  of  the 
divided  trunk  are  then  brought  together,  and  after  they 
have  again  united  the  tree  is  cut  oiF  below,  and  thus  a 
handle  of  convenient  length  and  firmly  attached  to  the  axe 
is  obtained.  How  much  shorter  and  more  skilful  is  the 
process,  by  which  the  intelligent  mechanic  furnishes  the 
same  tool  1  and  how  much  better  also  is  the  implement 
adapted  to  its  destined  use ! 

Another  striking  illustration  is  found  in  the  aid  derived 
from  those  properties  of  water,  which  adapt  it  to  bear 
heavy  burdens  on  its  bosom  and  to  give  them  an  easy 
passage  along  its  surface,  thus  assisting  man  in  the  work 
of  transportation.  To  avail  himself  of  this  aid  of  nature, 
the  savage  hollows  out  with  great  labor,  the  trunk  of  a 


AIDS  TO  PRODUCTION.  67 

large  tree,  or  constructs  his  frail  canoe  of  bark,  and  then 
with  his  simple  paddle  forces  it  on  the  water  from  one 
bank  of  the  river  to  its  opposite,  or  along  the  margin  of 
the  sea.  Contrast  this  little  canoe,  frail  in  its  materials 
and  structure,  and  limited  in  its  uses,  with  the  stately 
ship,  whose  ribs  are  of  oak,  and  whose  sinews  are  iron, 
and  which,  under  the  guidance  of  the  magnetic  needle, 
dares  traverse  the  pathless  ocean,  bearing  in  its  bosom 
rich  stores  of  wealth. 

On  the  benefits  derived  from  the  improved  use  of  nat- 
ural agency — especially  from  the  fertility  of  the  soil,  it  is 
unnecessary  to  enlarge.  .  Every  one  knows  what  these 
advantages  are,  both  as  to  their  extent  and  importance. 
Food  is  thus  furnished  in  greater  quantity  and  of  superior 
quality.  Materials  are  also  obtained,  which  being  sub- 
jected to  the  fashioning  power  of  art,  supply  in  abundance 
other  wants  of  the  human  family. 

The  benefits  derived  from  other  natural  aids  to  produc- 
tion, as  this  assistance  is  rendered  in  the  form  of  tools  and 
implements  of  industry,  are  also  sufficiently  obvious. 
There  is  hardly  any  kind  of  labor,  in  which  men  do  not 
in  this  way  avail  themselves  of  the  aids  of  nature,  and 
where  too  this  assistance  is  not  in  the  highest  degree  im- 
portant. But  when  we  come  to  see  these  aids  of  nature  in 
the  .form  of  machinery,  and  to  trace  out  the  consequences 
of  the  introduction  of  this  machinery  in  a  community, 
where,  from  the  economical  arrangements  that  exist,  the 
pursuits  and  interests  of  different  classes  and  individuals 
are  closely  interwoven,  mutually  affecting  each  other,  the 
advantages  derived  from  the  natural  aids  to  production, 
are  not  so  obvious.  And  further,  to  the  introduction 
of  the  aids  of  nature  in  the  form  of  machinery,  objec- 


68 


POLITICAL    ECONOMY. 


tions  are  made,  which  require  a  distinct  consideration. 
I  propose  therefore  to  shew,  why  what  are  called  labor- 
saving  machines  are  so  termed,  and  also,  how  the  intro- 
duction and  use  of  them  affect  the  different  interests  of 
the  community. 

Suppose  a  colony  of  one  hundred  families,  emigrating  from 
a  nation  in  the  enjoyment  of  the  comforts  and  convenien- 
ces of  civilized  life,  to  be  located  in  some  remote  territory, 
and  compelled  in  the  early  years  of  their  existence,  to  look 
to  their  own  efforts  and  resources  for  a  supply  of  their 
wants.  They  carry  with  them  of  course  a  knowledge  of 
the  arts  and  institutions  of  civilized  life,  and  the  most  com- 
mon and  important  implements  of  labor.  Their  first  efforts 
in  their  new  settlement  are  directed  to  furnishing  them.- 
selves  with  habitations  and  food,  and  then,  as  far  as  is  prac- 
ticable, with  other  conveniences  and  comforts,  to  which 
they  have  been  accustomed.  We  look  in  upon  this  colo- 
ny the  third  or  fourth  year  after  its  establishment,  and  we 
find  its  members  are  industriously  employed  in  different 
ways,  supplying  the  wants  of  the  community.  The  whole 
number  of  laborers  we  will  suppose  to  be  one  hundred  and 
fifty.  Of  this  number,  seventy  five  are  engaged  as  agri- 
cultural laborers,  and  twenty  five  are  mechanics,  twenty  five 
are  manufacturers,  and  twenty  five  are  either  professional 
men  or  domestic  servants.  While  labor  is  thus  proportion- 
ed out,  the  economical  concerns  of  the  colony  are  so  arrang- 
ed and  conducted,  that  the  wants  of  its  members  are  suppli- 
ed and  provision  made  for  its  gradual  increase.  Let  us  now 
suppose,  that  some  important  machine  is  invented — a  pow- 
er-loom for  example.  What  are  the  effects  of  its  introduc- 
tion. It  is  soon  found,  that  of  manufacturers  employed  in 
weaving  cloth  a  less  number  is  needed.     It  had  before  re- 


AIDS    TO  PRODUCTION. 


69 


I 


quired  ten  laborers  to  manufacture  the  cloth  used  in  the 
community  ;  but  now,  by  the  assistance  of  the  power-loom, 
two  can  perform  the  work  before  accomplished  by  ten. 
But  of  the  eight  laborers  thus  set  at  liberty,  two  must  be 
added  to  the  list  of  mechanics,  to  be  employed  in  making 
power-looms  and  keeping  them  in  repair ;  the  remaining 
six  are  set  at  liberty,  to  engage  in  some  other  department 
of  labor.  Here  then  is  one  immediate  and  direct  effect  of 
the  introduction  of  this  machine — the  same  amount  of  pro- 
ducts is  obtained  by  less  labor ;  hence  the  machine  is  call- 
ed a  labor-saving  machine.  But  let  us  look  at  other  con- 
sequences. 

The  price  of  cloth,  depending  principally  in  this  early 
state  of  the  colony  on  the  cost  of  its  production,  was  such 
when  ten  laborers  were  enojaged  in  its  manufacture,  that  all 
the  industrious  families  in  the  colony  cquld  afford  to  clothe 
themselves,  and  for  this  purpose  a  certain  part  of  their  an- 
nual revenue  was  set  aside.  But  now  that  the  use  of  a  la- 
bor-saving machine  has  diminished  the  cost  of  production, 
the  price  of  this  commodity  is  diminished ; — cloth  of  the 
same  quality  has  become  cheaper.  It  follows,  that  should 
the  same  amount  be  expended  annually  in  the  purchase  of 
cloth,  more  will  be  obtained  and  probably  of  a  better  qual- 
ity. Hence  there  arises  a  demand  for  more  cloth,  corres- 
ponding to  the  diminution  of  its  price.  Another  pawer- 
loom  therefore  must  be  made  and  put  into  operation,  and 
a  larger  amount  of  materials  used  in  the  manufacture  of 
cloth,  must  also  be  provided.  Two  consequences  then  re- 
sult; 1.  The  colony  is  better  supplied  writh  the  commodi- 
ty, in  the  production  of  which  the  newly  invented  machine 
is  employed.  2.  Employment  is  provided,  either  in  fur- 
nishing an  additional  amount  of  materials  for  the  manufac-* 


70  POLITICAL    ECONOMY. 

ture  of  the  commodity,  or  in  constructing  a  new  machine 
and  working  it,  for  as  many  laborers  as  were  before  enga- 
ged in  furnishing  the  same  commodity,  or  for  even  a  larger 
number.  Other  more  remote  effects  might  be  traced  out ; 
but,  at  present,  the  attention  may  be  confined  to  these  two. 

It  will  now  happen,  that  in  consequence  of  the  introduc- 
tion of  another  power-loom,  the  amount  of  cloth  manufac- 
tured will  be  greater  than  before,  while  its  price  will  be  in 
a  corresponding  degree  still  further  reduced.  But  the  fam- 
ilies in  the  colony  are  not  desirous  of  obtaining  a  larger  a- 
raount  of  cloth.  They  prefer  to  expend  a  smaller  propor- 
tion of  their  income  in  the  purchase  of  this  article,  and 
to  employ  the  surplus  thus  left  to  them,  in  the  gratification 
of  some  other  desire. 

Let  us  first  suppose,  that  this  surplus  is  devoted  to  ob- 
taining a  larger  supply  of  some  home  product — ^of  wheat, 
for  example.  The  demand  for  this  agricultural  product  is 
at  once  increased  ;  more  land  must  be  cultivated,  more  la- 
bor and  more  capital  employed  in  this  branch  of  industry. 
Thus,  in  consequence  of  the  introduction  of  a  labor-saving 
machine  into  a  branch  of  manufactures,  a  new  stimulus  is 
given  to  another  department  of  industry,  additional  em- 
ployment is  furnished  to  laborers,  and  a  further  invest- 
ment of  productive  capital  is  made.  Thus  too  the  differ- 
ent classes  of  society  feel  the  benefit  of  the  aids  of  nature, 
as  they  are  brought  to  their  assistance  in  the  form  of  la- 
bor-saving machines ;  and  the  prosperity  of  the  whole 
community  is  promoted. 

But  now  let  us  suppose,  that  a  different  disposal  is 
made  of  what  is  saved  from  the  diminished  price  of  cloth. 
Our  colonists,  who  in  their  new  settlement  have  been  de- 
prived of  some  of  those  articles  of  comfort  and  convene 


AIDS    TO  PRODUCTION.  71 

ience,  to  which  they  had  been  accustomed  before  their  re- 
moval, having  a  surplus  on  hand,  are  led  to  think  of  their 
former  enjoyments.  But  these  desired  commodities  are 
not  to  be  obtained  within  the  limits  of  the  colony — they 
are  the  products  of  a  foreign  soil.  Soon  however  it  is  as- 
certained, that  in  some  foreign  country,  where  these  desir- 
ed articles  are  produced,  there  is  a  demand  for  cloth,  and 
that  by  the  aid  of  power-looms  cloth  may  be  manufactured 
and  sent  to  this  foreign  market,  for  a  sum  not  exceeding 
the  current  price  in  that  market.  Instead  then  of  expend- 
ing their  surplus  income  in  the  purchase  of  a  home  pro- 
duct, they  send  it  abroad  in  the  form  of  cloth,  to  be  ex- 
changed for  some  foreign  commodity.  Thus,  as  the  re- 
sult of  machinery,  foreign  commerce  is  introduced,  with  all 
the  benefits  resulting  from  it,  both  as  it  offers  a  more 
abundant  and  varied  supply  to  the  wants  of  the  comftiu- 
nity,  opens  a  new  form  of  industry,  and  stimulates  to  in- 
creased efforts  in  every  department  of  production. 

If  now  we  look  back  on  the  statement  that  has  been 
made,  we  find,  that  the  following  consequences  result 
from  the  introduction  and  use  of  labor-saving  machines : 

1.  From  the  same  labor  a  greater  amount  of  the  com- 
modity, in  the  production  of  which  the  machine  is  em- 
ployed, is  obtained  ;  and  as  the  price  falls  in  proportion 
to  this  increased  amount,  each  consumer  is  enabled  to  ob- 
tain by  the  same  expenditure  a  larger  supply. 

2.  Should  the  newly  invented  machine  be  used  to  an 
extent,  which  increases  the  supply  of  the  article  beyond 
the  demand  of  the  community,  its  price  still  further  falls  ; 
and  as  a  less  expenditure  will  suffice  for  obtaining  this 
commodity,  a  surplus  will  be  saved  from  the  revenue  of 
consumers.     This  surplus  may  be  expended,  either  in 


72  POLITICAL    ECONOMY. 

the  purchase  of  a  larger  amount  of  some  home  product, 
or  it  may  be  sent  abroad  in  exchange  for  some  commodity 
of  foreign  production.  In  either  case,  an  addition  is  made 
to  the  wealth  of  the  community,  and  a  stimulus  given  to 
other  departments  of  production. 

3.  Laborers  thrown  out  of  employment  by  the  intro- 
duction of  machinery,  eventually  find  employment  in  the 
same,  or  some  other  branch  of  production,  to  which  a 
stimulus  is  given.  They  will  also,  as  consumers,  share 
in  the  benefit  of  a  diminished  price  and  an  increased  sup- 
ply of  the  comforts  and  conveniences  of  life,  resulting  from 
this  source.  And  here,  in  connexion  with  this  last  infer" 
ence,  the  principal  objection  to  machinery  offers  itself  to 
our  consideration.  It  is  said,  that  though  it  be  allowed, 
that  laborers,  with  others  in  the  community,  eventually 
derive  important  benefits  from  the  use  of  machinery,  still, 
its  introduction  is  attended  with  so  great  inconvenience 
and  distress  to  those  thrown  cut  of  employment,  that  these 
advantages  are  more  than  balanced.  To  shew  the  ex- 
tent of  these  evils  and  inconveniences,  an  appeal  is  made 
to  the  history  of  the  past,  and  to  the  sufferings  and  attendant 
tumults  and  riots  of  later  times.  We  are  told,  that  in  the 
last  century,  the  introduction  of  a  machine  for  wool-comb- 
ing into  England,  threw  out  of  employ  30,000  laborers. 
Similar  consequences  attended  the  invention  of  power- 
looms  and  calico-printing.  When  such  multitudes,  it  is 
said,  are  thus  deprived  of  their  accustomed  labor,  the  evils 
suffered  by  them  are  great,  and  much  time  must  elapse 
before  the  remedies,  which  have  been  referred  to,  will 
come  to  their  relief. 

It  is  common  for  laborers,  when  thus  thrown  out  of  em- 
ployment by  the  introduction  of  machinery,  to  apply  to 


AIDS  TO  PRODUCTION.  73 

the  government  of  the  country  for  relief.  Their  first 
petition  usually  is,  that  the  government  would  interfere  to 
prevent  the  use  of  the  newly  invented  machine.  But 
this  petition,  it  is  evidently  not  the  policy  of  the  govern- 
ment to  grant.  On  the  contrary,  the  puhlic  good  requires 
the  promotion  of  whatever  tends  to  increase  the  amount 
of  products  in  a  country,  developing  its  resources  and 
augmenting  its  wealth.  Besides,  it  would  be  prevented 
from  thus  interfering,  on  the  principle  of  competition. 
The  invention,  if  important,  might,  and  probably  would 
be  adopted  by  some  other  nation  ;  and  as  the  effect  of  its 
adoption  is  to  diminish  the  cost  of  production,  the  nation 
thus  adopting  it,  would  compete  advantageously  with  oth- 
er nations  in  foreign  markets.  On  this  account,  therefore, 
the  government  of  the  country,  w^here  the  invention  is 
made,  would  prefer  to  encourage  it,  and  thus  secure  to  its 
own  citizens  the  advantage  of  a  lower  cost  of  production. 

Another  way,  in  which  it  is  asked,  that  government 
would  give  relief,  is  by  providing  employment  for  those 
thus  deprived  of  their  accustomed  labor.  This  is  some- 
times done,  when  a  portion  of  the  public  revenue  is  ex- 
pended in  public  works,  or  internal  improvements.  Re- 
lief of  this  kind,  however,  is  but  partial  and  temporary, 
and  from  the  difference  in  the  kind  of  labor,  is  after  all 
not  very  acceptable.  But  there  is  another  measure 
adopted  by  most  governments,  which,  by  securing  the 
gradual  introduction  of  machinery,  gives  important  relief 
to  the  laborer,  and  at  the  same  time  offers  encouragement 
for  the  invention  of  labor-saving  machines.  I  refer  to 
what  are  termed  patent  rights. 

The  immediate  object  of  patent  rights  is  remuneration 
for  useful  discoveries  and  inventions.     This  is  effected  in 

7 


74  POLITICAL    ECONOMY. 

the  following  manner :  While  the  use  of  a  newly  inven- 
ted machine  is  confined  to  the  inventor,  and  those  to 
whom  he  may  sell  the  right  of  using  it,  the  saving  made 
in  the  cost  of  production,  should  the  former  price  of  the 
commodity  be  continued,  goes  to  increase  the  profits  of 
the  producers.  But  should  the  price  be  lowered  in  pro- 
portion to  the  diminished  cost  of  the  commodity,  this  di- 
minution of  the  price  gives  a  command  of  the  market ; 
and  thus  from  larger  sales  the  same  amount  of  profits  is 
secured.  In  either  case,  the  inventor  receives  the  bene- 
fit of  his  invention.  But  while  the  inventor  is  thus  re- 
munerated, the  gradual  introduction  of  the  newly  inven- 
ted machine,  and,  of  course,  relief  to  the  laborer,  is  secu- 
red as  effectually,  as  if  a  law  were  enacted  and  enforced 
with  this  specific  object  in  view.  Before  there  is  a  re- 
duction in  price,  and  even  after  that  reduction  has  com- 
menced, those  employed  in  the  old  mode  of  producing 
will  still  continue  their  labors.  And  as  they  will  gene- 
rally know  of  the  improvements,  they  will  thus  have  time 
to  look  about  them  and  find  some  new  employment. 
Besides,  it  is  thus  effected,  that  before  laborers  are  driven 
from  their  accustomed  pursuits,  one  of  the  most  efficient 
remedies  for  their  relief  is  brought  into  operation.  I  refer 
to  the  increased  demand  for  the  product,  arising  from  the 
diminution  of  its  price. 

In  what  has  now  been  brought  forward  on  the  subject 
of  labor-saving  machines,  particular  reference  has  been  had 
to  manufactures.  But  most  of  the  principles  stated,  ap- 
ply to  inventions  of  this  kind  in  the  mechanical  arts,  and 
in  the  common  occupations  of  life.  In  these  instances, 
however,  the  number  of  laborers,  whose  interests  are  af- 
fected, is  small,  and  change  of  employment,  so  far  as  it  is 


AIDS  TO  PRODUCTION.  75 

necessary,  is  attended  with  little  inconvenience.  Here  too 
the  law  of  patent  rights  comes  in  with  important  relief; 
for  as  the  demand  for  the  kind  of  labor  to  which  the  in- 
vention pertains,  is  limited,  the  inventor  finds  it  for  his 
advantage,  to  keep  up  the  price  of  the  product  nearly  or 
quite  to  its  former  rate.  Of  course,  the  old  laborers  are 
very  gradually  supplanted. 

Circumstances  favorable  to  the  developement  of  natural  aids 
to  production. 

Natural  agents  and  other  aids  to  production  which  arise 
from  the  properties  of  material  objects  and  the  laws  of 
nature,  are  said  to  be  developed,  when  they  are  made 
known  and  turned  to  the  best  account.  It  is  the  object  of 
this  section  to  state  some  circumstances,  favorable  to  the 
developement  of  the  aids  of  nature,  in  this  use  of  the  term. 

1.  The  cultivation  of  the  natural  sciences. 

It  has  been  stated,  that  it  is  the  appropriate  business  of 
the  chymist  and  natural  philosopher,  to  investigate  the 
properties  of  material  objects  and  the  laws  of  the  natural 
world.  Wherever,  then,  there  is  a  class  of  men  thus 
engaged,  making  inquiries  of  this  kind  their  study,  it  may 
reasonably  be  expected,  that  important  discoveries  and 
inventions  will  be  made.  It  is  true,  that  some  of  the  aids 
of  nature  are  so  obvious,  and  so  profusely  offered  to  man, 
that  the  most  careless  cannot  but  notice  them,  and  the 
most  indolent  avail  themselves  of  their  use.  But  even 
in  these  instances,  much  is  often  effected  by  the  guidance 
and  assistance  of  science.  Thus  a  fertile  soil  is  a  natural 
agent,  of  which  all  may  know,  and  of  which  also,  as  it  of- 
fers its  spontaneous  fruits,  all  may  avail  themselves  ;  yet 


76  POLITICAL    ECONOMY. 

this  soil  becomes  far  more  productive,  when  its  cultivation 
is  directed  by  the  scientific  agriculturalist.  It  also  often 
happens,  that  important  discoveries  and  inventions  seem 
to  be  accidental,  or  they  are  made  by  those  who  are  em- 
ployed as  laborers,  and  who  are  unacquainted  with  the 
principles  of  science.  But  most  frequently,  even  in  these 
cases,  such  discoveries  and  inventions  are  not  turned  to 
the  best  account,  till  the  guiding  assistance  of  science  has 
been  given. 

But  the  history  of  inventions  tells  us,  that  the  instances 
are  not  few,  in  which  most  useful  and  important  discover- 
ies and  inventions  have  resulted  directly  from  the  patient 
research,  the  able  reasonings,  and  the  often  repeated  ex- 
periments of  scientific  men.  The  miner's  safety-lamp  is 
a  striking  example.  Before  this  highly  important  aid  to 
the  miner  was  brought  to  its  present  degree  of  perfection, 
Sir  H.  Davy  devoted  more  than  a  year  to  laborious  inves-». 
tigations  and  experiments.  It  is  in  this  way,  also,  that, 
in  the  manufacture  of  cloths,  the  business  of  colouring  has 
been  brought  to  its  present  improved  state. 

And  in  this  connexion  it  may  be  remarked,  that  the 
habits  of  mind,  which  are  formed  by  scientific  researches 
and  reasonings,  are  in  themselves  of  great  advantage  in 
the  developement  of  the  aids  of  nature.  Much  that  is 
included  under  the  head  of  invention,  is  but  the  new  com- 
bination and  application  of  the  properties  of  material  ob- 
jects— of  natural  and  mechanical  powers  ;  and  for  work  of 
this  kind,  ingenuity,  which  is  but  another  term  for  quickness 
of  discernment,  combined  with  skill  and  strength  in  reason- 
ing, is  required.  Hence  all  those  employments,  which  tend 
to  sharpen  the  discerning  faculties  of  the  mind,  and  to  quick- 
en its  powers  of  analysis  and  combination,  are  indirect 


AIDS  TO  PRODUCTION.  il 

aids  to  the  developement  of  the  productive  powers  of  na- 
ture. 

2.  Minute  division  of  labor. 

In  the  chapter  on  economical  arrangements,  the  con- 
nexion between  division  of  labor  and  the  invention  of 
machinery  was  brought  to  view.  I  add  here,  that  as  this 
division  becomes  more  minute,  the  probability  that  such 
inventions  will  be  made,  is  in  a  corresponding  degree  in- 
creased. The  reasons  of  this  statement  are  obvious. 
Just  in  proportion  as  division  of  labor  becomes  more  mi- 
nute, each  single  process  becomes  more  simple,  and  con- 
sequently more  easily  admits  of  the  use  of  machinery.  It 
would  be  beyond  the  powers  of  human  invention,  to  con- 
trive a  machine,  which  receiving  the  raw  cotton,  should 
turn  it  out  printed  calico  ;  but  when  the  making  of  this 
calico  is  divided  into  twenty  or  thirty  distinct  processes, 
machinery  is  with  little  difficulty  introduced  into  many  of 
these  processes.  And  further,  the  probability  of  its  be- 
ing invented  is  increased  from  the  circumstance,  that  the 
whole  attention  of  the  laborer  is  directed  to  some  single 
process,  and  he  will  very  naturally  be  led  to  inquire,  in 
what  way  this  process  may  be  performed  with  the  least 
amount  of  labor  to  himself.  Some  highly  important  im- 
provements in  machinery  have  in  this  manner  been  intro- 
duced. 

The  same  principle  is  also  illustrated  in  the  improve- 
ments, which  are  made  in  some  branches  of  agricultural 
industry.  Individuals,  who  confine  their  attention  to  the 
raising  of  some  particular  vegetable,  or  any  one  agricultural 
product,  often  obtain  an  unusual  degree  of  skill,  which  is 
seen,  both  in  the  largeness  of  their  crops  and  the  superi- 
or quality  of  their  products. 
7* 


7B  POLITICAL    ECONOMY. 

3.  Whatever  causes  tend  to  increase  the  demand  for 
products,  are  favorable  to  the  developement  of  the  aids  of 
nature. 

The  stimulating  effect  of  an  enlarged  demand  upon  pro- 
duction, was  to  some  extent  brought  to  view  in  the  chap- 
ter on  economical  arrangements  ;  but  it  may  be  looked  at  in 
connexion  with  our  present  topic  of  inquiry.  It  is  the  ob- 
ject of  labor-saving  machines,  to  increase  the  amount  of  pro- 
ducts obtained  from  the  same  or  less  labor.  Hence  an  en- 
larged demand  for  products  acts  as  a  stimulus  upon  study 
and  invention  ;  and  thus,  indirectly,  whatever  causes  tend 
to  increase  the  demand  for  products,  lead  to  the  devel- 
opement of  natural  aids  to  production.  These  causes  are 
the  opening  of  foreign  markets,  and  the  stimulating  effects 
of  different  branches  of  production  upon  each  other  in  a 
prosperous  and  thriving  community.  In  England,  natu- 
ral aids  to  production  have  been  developed  to  an  extent 
unequalled  in  any  other  country,  which  is  without  doubt 
to  be  ascribed  in  part  to  the  great  amount  of  her  domes- 
tic consumption,  but  principally  to  the  stimulating  influ- 
ence of  her  extensive  foreign  commerce. 

It  is  from  these  views,  that  the  governments  of  differ- 
ent countries  are  led  to  the  adoption  of  measures,  design- 
ed for  the  encouragement  of  home  products.  In  this  way 
they  seek  to  develope  the  productive  resources  of  a  coun- 
try of  every  kind, — those  pertaining  to  labor  and  capital 
and  natural  aids.  It  is  the  latter,  however,  which  are 
more  especially  had  in  view.  And  whatever  may  be 
thought  of  the  wisdom  of  such  measures,  the  principles 
on  which  they  rest,  are  a  corroboration  of  the  statement 
that  has  here  been  made.  It  is  by  enlarging  the  de- 
mand, that  this  encouragement  is  given. 


AIDS  TO  PRODUCTION.  79 

The  supposition  is  sometimes  made,  that  machinery  is 
introduced,  so  as  entirely  to  supersede  the  labors  of  man  ; 
and  it  is  asked,  whether,  in  this  case,  the  resulting  effects 
would  be  advantageous. 

I  answer,  that  the  supposition  is  an  impossibility.    The 
making  of  machinery  must  of  itself  give  employment  to 
many.     And  further,  the  object  of  machinery  is  not  so 
much  to  supplant  human   labor,  as  it  is  to  render  that  la- 
bor more  efficient  and  productive.     Machinery  has  in  this 
respect  been  well  compared  to  a  fertile  soil.     Suppose, 
that  by  the  exertion  of  a  miraculous  power,  the  fertility  of 
the  soil  throughout  the  world  should  be  increased  four- 
fold, so  that  for  the  coming  year  the  returns  of  agricultu- 
ral industry  should  be  greater  in  this  proportion.     There 
would  of  course  be  a  great  increase  of  food  and  of  other 
agricultural   products,  for  the  supply  of  human  wants. 
The  price  of  these  products  would  also  fall,  but  the  larger 
amount  obtained  by  the  agriculturalist  would  make  up  for 
this  diminution  of  price,  especially  as  he,  in  common  with 
others,  would,  as  a  consumer,  share  in  the  benefits  of  the 
greater  abundance.     It  is  true,  also,  that  another  year 
some  of  those,  who  had  been  engaged  as  agricultural  pro- 
ducers, would  find  it  necessary  to  change  their  employ- 
ments, and  to  engage  in  some  branch  of  manufacturing, 
or  commercial  industry.     But  now  suppose,  that  a  like 
increase  of  productive  power  should  take  place  in  manu- 
factures and  commerce,  and  that  thus  the  amount  of  labor, 
required  to  supply  the  great  family  of  man,  should  in  a  cor- 
responding degree  be  diminished.     It  does  not  follow,  that 
men  need  be  idle,  or  that  their  condition  would  not  be  im- 
proved.    Should  men  be  relieved  from  the  necessity  of  toil 
to  supply  the  wants  of  the  body,  there  are  other  and  higher 


'80  POLITICAL    ECONOMY. 

occupations  in  which  they  might  engage  ;  for  there  is  to 
man  the  labor  of  the  mind,  and  the  accumulation  of  stores 
of  knowledge,  more  valuable  than  those  of  material  things. 
Here  indeed  is  one  argument  in  favor  of  the  unlimited  in- 
troduction of  machinery  ;  its  introduction  is  connected 
with  the  progress  of  the  human  race  in  knowledge  and  in- 
tellectual advancement.  For  it  may  be  anticipated,  that 
in  proportion  as  men  are  set  free  from  the  necessity  of 
toil  in  the  supply  of  their  animal  wants,  they  will  have 
both  leisure  and  inclination  to  engage  in  the  labors  of  the 
mind. 


CHAPTER  V. 

Productive  Capital. 

An  explanation  of  the  phrase,  productive  capital,  has 
been  given,  and  its  accumulation  shewn  to  be  the  result 
of  industry  and  frugality.  A  general  statement  has  also 
been  made  of  the  different  forms  it  assumes,  and  of  the 
aid  which  it  gives  in  the  work  of  production.  I  propose 
in  the  present  chapter  still  further  to  consider  it  as  a  pro- 
ductive agent,  and  to  bring  to  view  circumstances  favora- 
ble to  its  accumulation  and  efficiency. 

Transformations  to  which  capital  is  subjected  in  the  work  of 
production. 

Capital,  to  become  productive,  must  be  consumed. 
Of  the  grain  of  wheat,  it  is  literally  true,  and  figuratively 
so  of  productive  capital,  in  whatever  form  it  may  be  vested, 
that,  except  it  die,  it  bringeth  forth  no  fruit. 


PRODUCTIVE  CAPITAL.  81 

And  here,  I  propose  to  trace  the  transformations,  to 
which  capital  is  subjected  in  the  different  processes  of 
production.  In  agricuhure,  at  the  commencement  of  the 
economic  cycle,*  the  capital  of  the  farmer,  who  is  we  will 
suppose  the  owner  of  his  farm,  is  in  his  barns,  his  grana- 
ries, his  fencing  and  other  permanent  improvements  of  his 
farm — in  his  wagons,  carts  and  other  implements  of  hus- 
bandry, in  his  cattle,  his  seed,  his  dressings,  which  are  to 
be  applied  to  the  land — in  his  stock  of  provisions  for  the 
support  of  himself,  of  his  laborers  and  of  his  cattle,  and  in 
his  money  for  meeting  incidental  expenses  and  the  pay- 
ment of  the  wages  of  laborers.  Now  of  the  capital  thus 
vested,  a  part  is  said  to  be  fixed  capital,  and  a  part,  circu- 
lating. Of  this  distinction,  the  real  ground  is,  that  during 
every  economic  cycle,  a  part  is  partially  and  another  part 
totally  consumed.  The  improvements  on  the  farm,  and 
what  are  called  the  fixtures,  will  last  for  a  certain  number 
of  years — suppose  twenty  as  the  average, — one  twentieth 
part  of  their  value  is  then  annually  consumed.  The  aver- 
age consumption  of  the  implements  of  husbandry  is  short- 
er— perhaps  five  years.  Then  comes  the  capital  of  which 
the  consumption  is  total,  that  vested  in  seed  stuff,  in  dress- 
ings, in  provisions  and  in  money.  This  then,  so  far  as 
capital  is  concerned,  is  the  process  of  production  ;  during 
the  economic  cycle  all  this  value — that  is,  a  twentieth  part 
of  the  improvements  of  the  farm  and  of  the  fixtures  upon 
it,  a  fifth  part  of  the  value  of  the  implements  of  husbandry, 

*  This  phrase  conveniently  expresses  the  whole  course  of 
production,  from  the  time  that  outlays  are  made,  till  returns 
are  received.  In  agriculture,  seed-time  is  its  commencement| 
and  harvesting  its  ending. 


02  POLITICAL   ECONOMY. 

used  in  the  cultivation  of  the  farm,  and  the  whole  amount 
used  as  circulating  capital,  disappear.  Then  again,  at  the 
end  of  the  cycle,  which  in  this  case  is  the  time  of  harvest- 
ing, this  same  value  reappears  in  the  form  of  the  annual 
proceeds  of  the  farm,  and,  if  the  process  is  a  profitable 
one,  it  returns  with  an  increase  of  its  amount  to  the  farmer. 

Similar  in  all  respects  are  the  transformations  of  capital 
in  manufacturing  production.  At  the  commencement  of 
the  economical  cycle,  the  capital  of  the  manufacturer  is 
vested  in  his  buildings,  his  machinery,  the  raw  materials 
to  be  manufactured,  and  the  wages  of  laborers.  As  the 
process  goes  forward,  the  capital  thus  vested  is  in  part  or 
wholly  consumed,  and  reappears  in  the  manufactured  pro- 
ducts. Here  then,  as  the  result  of  the  process,  is  the  same 
value  under  another  form,  and  in  connexion  with  it  the 
profits  of  the  manufacturer. 

So  in  commercial  production,  the  capital  of  the  mer- 
chant is  in  his  ship,  in  the  cargo  with  which  she  is  freighted, 
in  the  wages  of  seamen  and  other  laborers,  as  clerks,  por- 
ters, stevedores,  &c.  So  too,  when  the  process  is  con- 
cluded, though  the  principal  part  of  the  investment  may 
have  been  changed  in  its  form  many  times,  its  value  is 
retained,  and  the  whole  reappears  with  the  profits  of  the 
adventure. 

Thus  it  is,  that  capital,  to  be  productive,  must  be  con- 
sumed— that  is,  it  disappears  in  one  form,  to  reappear  in 
another. 

Capital  as  directed  to  different  employments. 

Nations  differ  from  each  other  as  to  the  proportional 
amount  of  capital,  which  is  employed  in  the  three  great 
branches  of  production.     Thus  from  the  prevailing  mode 


^  PRODUCTIVE  CAPITAL.  CO 

of  investment,  some  nations  are  called  agricultural  nations, 
some  manufacturing,  and  others,  commercial.  In  the 
same  nation,  changes  in  the  mode  of  investing  capital  are 
not  unfrequently  made,  not  perhaps  general  changes,  but 
individuals  are  withdrawing  their  capital  from  one  form  of 
production  and  giving  it  a  new  direction.  Our  inquiry  re- 
lates to  the  moving  cause,  by  which  capital  is  thus  di- 
rected to  different  branches  of  production. 

The  general  answer  to  our  inquiry  is — the  rate  of 
profits.  Capitalists  are  ever  asking,  from  what  invest- 
ments the  largest  revenues  are  received,  and  the  varia- 
tions of  profits,  that  occur  in  different  branches  of  pro- 
duction, are  followed  by  corresponding  changes  in  the 
modes  of  investing  capital.  The  causes,  which  thus  af- 
fect the  rate  of  profits,  are  numerous.  The  discovery  oF 
some  new  territorial  advantages — the  invention,  or  new 
application  of  machinery — the  opening  of  a  new  market, 
or  the  loss  of  an  old  one ;  or  any  of  those  changes  in  the 
wants  of  a  community,  to  which  we  give  the  name  of 
fashion,  are  the  most  prominent  of  these  causes.  Other 
causes  also  arise  of  a  more  limited  nature,  affecting  the 
interests  of  individuals  only,  or  of  some  one  department 
of  production.  As  soon  then  as  capitalists  find  out,  that 
the  rate  of  profits  obtained  by  others  is  greater  than  their 
own,  they  have  before  them  a  motive  to  change  the  in- 
vestment of  their  capital,  and  this  motive  will  prevail,  un- 
less other  considerations  of  paramount  importance  come  in 
to  prevent. 

Thus  it  is,  that  capital  is  directed  to  different  employ- 
ments by  the  rate  of  profits.  But  the  considerations 
which  modify  this  general  principle,  need  to  be  stated. 
They  are  as  follows  ; 


84  POLITICAL  ECONOMY. 

1 .  The  difficulties  connected  with  a  change  of  invest- 
ment. 

A  capitalist,  whose  property  is  productively  invested, 
will  generally  find  a  change  attended  with  inconvenience 
and  loss.  Such  changes  are  usually  effected  by  the  aid 
of  a  circulating  medium.  The  property  now  in  posses- 
sion, must  be  turned  into  money,  and  this  money  must  be 
expended  in  the  purchase  of  property  of  a  different  kind  ; 
and  it  not  unfrequently  happens,  that  this  double  transfer 
is  attended  with  loss.  He  will  also  take  into  the  account 
the  knowledge  and  skill,  which  he  is  capable  of  bringing 
to  the  management  of  his  property  in  its  new  form,  com- 
pared with  what  he  has  been  accustomed  to  exercise,  and 
also  the  personal  inconvenience  and  trouble,  to  which 
from  a  change  of  business  he  must  be  subjected.  The 
man,  for  instance,  who  from  his  early  years  has  been  fa- 
miliar with  the  management  of  property  as  vested  in  a 
farm,  may  know,  that  the  same  amount  of  capital  would 
yield  him  a  larger  revenue,  if  employed  in  navigation ; 
but  it  might  not  be  wise  in  him,  on  this  account,  to  sell 
his  farm  and  vest  his  property  in  shipping. 

2.  The  risk,  which  attends  different  investments. 

It  is  well  known,  that  capital  in  some  employments,  is 
much  more  exposed  to  injury  and  loss,  than  when  differ- 
ently situated.  And  since  the  practice  of  insurance  has  be- 
come common,  this  difference  of  exposure  is  generally  esti- 
mated, and  taken  into  the  account,  in  determining  the  profits 
of  different  investments.  Our  farmer  would  without  doubt 
regard  this  as  an  important  consideration,  when  inquiring, 
whether  he  might  advantageously  exchange  his  paternal 
acres,  for  the  floating,  perishing  ships  of  commerce.  But 
there  is  another  kind  of  risk,  which  i§  not  always  so  care* 


PRODUCTIVE  CAPITAL.  86 

fully  considered — the  risk  of  success.  The  revenue  of 
capital  vested  in  some  branches  of  production,  often  appears 
to  be  unusually  large,  when  the  attention  is  confined  to 
the  income  of  some  prosperous  individuals,  and  thus  many 
are  led  to  form  erroneous  conclusions,  and  in  the  end  are 
subjected  to  losses  and  disappointment.  In  such  instan- 
ces, a  more  just  estimate  is  made,  by  taking  the  average 
rate  of  income  of  all  those  thus  employing  their  capital, 
and  when  this  is  done,  the  result  will  often  be  found  to 
differ  essentially  from  individual  cases.  Some  merchants, 
in  the  course  of  a  few  years,  acquire  large  estates,  and  in 
looking  at  these  successful  adventurers  in  commerce,  we 
may  be  led  to  the  conclusion,  that  the  rate  of  profits  on 
mercantile  capital,  is  much  larger  than  on  agricultural. 
But  should  we  take  into  the  account  the  many  losses  sus-  . 
tained  by  the  community  of  merchants,  the  number  of 
failures,  as  well  as  the  instances  of  uncommon  success,  it 
would  be  found,  that  the  average  rate  of  profits  in  com- 
merce, does  not  differ  from  that  of  capital,  when  vested 
in  other  branches  of  production. 

Other  considerations  of  less  extent  in  their  influence, 
and  which  need  only  to  be  mentioned,  are  the  following  ; 
the  pleasantness  of  the  business,  in  which  it  is  proposed 
to  engage,  and  its  reputation  in  the  community — its  moral 
bearings,  and  the  associates  with  whom  it  will  require  in- 
tercourse, he.  We  may  add  also  other  views  of  a  more 
private  and  personal  nature. 

From  the  princi,  le,  that  the  rate  of  profits  determines 
the  manner  of  investing  capital,  which  is  brought  to  view 
in  this  section,  the  important  inference  may  be  drawn, 
that  the  government  of  a  country  should  abstain  from  in- 
terfering, directly  or  indirectly,  with  the  mode  of  investing 
8 


86  POLITICAL    ECONOMY. 

productive  capital  in  the  possession  of  individuals.  So 
many  are  the  circumstances  to  be  taken  into  the  account, 
in  determining  the  question  of  investment,  that  neither  an 
individual  ruler,  nor  a  public  body  of  legislators,  can  ad- 
vantageously judge.  It  is  therefore  wiser  and  safer,  to 
leave  the  whole  subject  to  those,  who  are  more  imme- 
diately interested.  The  motive  to  seek  after  the  most 
profitable  mode  of  investment,  is  sufficiently  strong  in 
every  breast ;  and  where  the  minds  of  men  are  in  some 
good  degree  enlightened,  and  knowledge  is  generally  dif- 
fused, there  will  be  no  want  of  enterprise,  or  sagacity. 
It  is  true,  there  will  be  instances  of  rash  and  foolish  in- 
vestment, and  losses  will  be  sustained  ;  still  the  general 
welfare  will  on  the  whole  be  promoted  by  the  course  here 
recommended. 

Why  is  the  amount  of  productive  capital  in  modern  nations, 
greater  than  informer  periods  of  the  world  1 

It  will  be  readily  allowed,  that  the  amount  of  capital  in 
modern  nations  is  much  greater,  than  was  possessed  by  the 
nations  of  the  world  a  century  ago,  and  further,  that  it  was 
greater  at  that  time,  than  at  the  commencement  of  the  pre- 
ceding century — in  other  words,  that,  excepting  perhaps 
some  powerful  nations  which  became  for  a  time  conquer- 
ors of  the  world,  and  by  violence  and  extortion  collected 
together  its  riches,  there  has  been  a  regular  progress  in  na- 
tional wealth.  It  is  true,  that,  if  in  the  history  of  most 
nations,  we  look  at  particular  periods,  we  shall  find,  that 
causes  have  been  at  work  to  impoverish  and  weaken 
them.  Such  are  the  exactions  and  wrong-headed  meas- 
ures of  oppressive  and  unwise  governments — the  profu- 
sion and  extravagance,  both  of  rulers  and  of  private  indi- 


PRODUCTIVE  CAPITAL. 


87 


viduals,  and  more  than  all  other  causes,  the  enormous  ex- 
penditures and  the  ruinous  losses  of  protracted  wars.  But 
these  causes,  though  while  they  last  they  are  highly  inju- 
rious, and  their  consequences  are  severely  felt,  are  tempo- 
rary, and  there  is  in  thriving  communities,  as  in  the  hu- 
man system,  when  subjected  to  the  power  of  disease,  a 
restorative  principle,  which  makes  its  elastic  and  healing 
power  to  be  felt.  Hence,  if  our  comparisons  are  insti- 
tuted between  remote  periods,  the  influence  of  these  tem- 
porary causes  will  be  lost,  and  it  will  be  found,  that,  not- 
withstanding the  hindrances  that  have  arisen,  there  has 
been  in  the  community  of  nations  a  steady  and  decided 
advance  in  wealth. 

Now  our  question  looks  at  this  fact,  and  is  designed  to 
call  forth  an  explanation  of  it.  And  it  will  be  noticed, 
that  the  answer  to  this  inquiry  brings  to  view  the  circum- 
stances, which  are  favorable  to  the  accumulation  and  in- 
creased efficiency  of  productive  capital. 

Whether  there  is  more  industry  in  the  world  now,  than 
there  was  a  century  ago,  in  proportion  to  its  population, 
is  a  question,  which  it  might  be  difficult  to  decide.  It  is 
certain,  however,  that  in  civilized  nations  the  amount  of 
annual  products  is  much  increased.  As  nations  have  be- 
come more  populous,  and  the  style  of  living  has  been 
raised,  there  are  more  wants  to  be  supplied,  and  not  only 
is  a  supply  to  these  more  numerous  wants  furnished,  but 
it  is  more  generous  in  amount  and  better  in  quality  than 
at  former  periods.  There  must  then  either  be  more  la- 
bor in  proportion  to  population)  or  this  labor  must  be 
more  productive.  That  the  latter  is  the  case,  all  must 
see,  and  w^hat  has  been  said  in  a  preceding  chapter  on 
the  aids  of  nature,  fully  accounts  for  this  enlarged  pro- 


SS  POLITICAL  ECONOMY. 

duction.  Here  then,  without  doubt,  is  the  principal  cause 
of  the  larger  amount  of  productive  capital  found  in  mod- 
ern nations.  Owing  to  the  more  extensive  and  improved 
use  of  natural  assistants,  human  industry  has  become  far 
more  efficient — man,  if  he  does  not  work  more,  works  to 
better  advantage.  Hence  the  surplus  left  to  producers, 
after  supplying  their  wants,  is  greater,  and  here  is  one 
source  of  those  accumulations,  which  constitute  produc- 
tive capital.  To  corroborate  this  statement,  we  might 
look  at  those  nations,  in  which  the  aids  of  nature  have  been 
thus  developed — to  England,  for  example.  To  every 
one,  the  increase  of  her  productive  power,  arising  from 
the  extent,  to  which  she  has  availed  herself  of  natural 
aids,  especially  in  the  form  of  machinery,  is  obvious  and 
striking,  and  the  accumulation  of  her  productive  capital 
has  fully  corresponded.  A  second  source  of  this  enlarg- 
ed amount  of  productive  capital  in  modern  nations,  is 
closely  connected  with  the  statement  just  made.  From 
the  more  extensive  and  improved  use  of  natural  assistants, 
and  the  consequent  lessened  cost  of  production,  the  price 
of  most  articles  in  common  use  has  fallen.  Hence,  though, 
men  do  not  consume  less  than  in  former  times,  but  on 
the  contrary  though  they  consume  more,  there  is  still  a 
diminution  in  the  cost  of  living.  Many  articles  also  now  in 
use,  are  not  only  cheaper,  but  in  every  respect  far 
better,  than  those  formerly  used  for  the  same  purposes. 
Modern  paper-hangings  compared  with  ancient  tapestry, 
is  an  example.  Thus  it  is,  that  the  diminished  price  of 
commodities,  leads  to  the  same  result,  as  would  be  attained 
by  a  greater  degree  of  frugality, — men  have  around  them 
more  of  the  comforts  and  conveniences  of  life,  but  they 
spend  less.     Thus  also  the  two  causes — the  greater  pro- 


PRODUCTIVE  CAPITAL.  89 

ductiveness  of  human  industry,  and  the  diminished  price 
of  the  necessaries  of  Hfe,  conspire  to  swell  the  amount  of 
productive  capital  in  modern  nations. 

The  habits  of  modern  communities  compared  with 
those  of  ancient  times,  tend  to  the  same  result.  Former- 
ly, rich  men  kept  about  them  a  great  multitude  of  attend- 
ants. It  was  in  this  way  that  their  wealth  was  displayed, 
and  their  pride  gratified.  But  this  portion  of  the  com- 
munity, whose  maintenance  exhausted  the  revenues  of 
the  rich,  was  supported  in  indolence,  or  if  any  service 
was  rendered,  it  was  of  an  unproductive  kind.  Now,  also, 
the  revenues  of  the  rich  are  distributed  for  the  support  of 
numerous  dependents  ;  but  those  thus  maintained  by  them 
are  in  the  workshop  and  the  manufactory,  and  the  fruits 
of  the  service  which  they  render,  are  seen  in  the  comforts 
and  luxuries  of  life.  Thus  the  crowd  of  retainers,  instead 
of  lounging  about  the  castles  of  the  great  and  the  affluent, 
has  become  a  crowd  of  productive  laborers ;  and  the  ef- 
fects of  this  change  of  national  habits  are  seen  in  the  in- 
creased accumulation  of  capital. 

The  greater  security  of  capital  in  modern  times,  is 
another  reason,  why  more  is  accumulated.  Formerly,  in 
many  parts  of  the  world,  men  were  afraid  to  be  known  to 
possess  wealth,  as  it  invited  to  oppression  and  violence, 
either  from  the  government  of  the  country,  or  from  rob- 
bers and  plunderers.  In  most  modern  nations  it  is  other- 
wise. Individuals  are  found,  whose  capital  and  revenues 
are  estimated  by  millions,  and  who  yet  hold  their  immense 
possessions  in  perfect  security. 

At  the  same  time  that  greater  security  is  afforded  to  cap- 
italists, the  revenue  derived  from  the  use  of  capital  and  the 
more  liberal  views  which  prevail  on  the  subject  of  usury, 
8* 


90  POLITICAL    ECONOMY. 

have  placed  before  men  strong  motives  to  exert  themselves 
for  its  attainment.  With  many,  the  end  at  which  they  aim 
in  their  daily  toil,  is  to  acquire,  and  vest  in  some  profitable 
manner,  a  sufficient  amount  of  capital,  to  make  them  inde- 
pendent— that  is,  to  derive  a  revenue  from  their  capital,  suf- 
ficient to  support  them  in  the  style  of  living,  to  which  they 
have  been  accustomed. 

Thus  the  fact,  that  the  amount  of  capital  is  larger  among 
modern  nations  than  at  former  periods,  has  been  account- 
ed for,  and  at  the  same  time  some  of  the  circumstances 
favorable  to  the  accumulation  of  capital,  and  its  efficiency 
as  an  agent  in  production,  have  been  stated. 

How  ought  capitalists  to  he  regarded  in  the  community  f 

Among  some  classes  of  society,  there  not  unfrequenl- 
ly  exists  a  prejudice  against  men  of  wealth — a  feeling, 
that  such  have  got  more  than  their  share  of  the  common 
stock,  and  that  on  this  account,  or  for  some  other  similar 
reason,  they  are  just  objects  of  suspicion  and  disfike.  At 
least,  the  impression  is  not  uncommon,  that  the  interests 
of  the  rich  are  in  some  way  opposed  to  those  of  the  less 
wealthy. 

Correct  views  on  the  subject  of  capital,  both  as  to  the 
manner  in  which  it  is  obtained,  and  the  uses  which  are 
made  of  it,  are  well  fitted  to  shew,  that  such  prejudices 
are  without  foundation.  If  a  man  acquires  wealth  by  ex- 
tortion, by  oppressing  and  grinding  the  poor,  or  by  any 
unfair  and  dishonest  practices,  no  matter  how  strong  the 
prejudices  which  are  felt  against  him,  nor  how  openly 
they  are  manifested.  But  the  fact  that  there  are  rich 
men  who  are  dishonest  men,  is  no  good  reason,  why  men 
of  wealth,  as  a  class  of  the  community,  should  be  regard- 


PRODUCTIVE  CAPITAL..  91 

ed  with  suspicion  and  dislike.  There  are  poor  men  who 
are  dishonest,  still  we  are  to  hold  in  respect  the  honest 
poor. 

In  most  instances,  the  rich  man's  wealth  is  the  fruit  of 
his  own  industry  and  frugality,  or  a  portion  of  it  may  have 
been  received  by  inheritance  from  others  who  were  indus- 
trious and  frugal.  Or  it  may  be,  that  a  part  of  this  accu- 
mulated wealth  is  rent,  received  for  lands  that  have  been 
cultivated  and  made  to  yield  a  supply  of  agricultural  pro- 
ducts ;  another  part  may  be  interest  for  the  loan  of  capi- 
tal productively  vested.  In  either  case,  there  is  no  ground 
for  prejudice  against  the  capitalist,  whose  wealth  has  been 
thus  acquired.  For  in  a  well  ordered  community,  it  is 
permitted  to  every  man,  in  fair  competition  with  others, 
to  obtain  whatever  he  can  acquire  by  the  exertion  of  bis 
powers  of  mind  and  body,  and  by  the  employment  of  his 
resources  in  the  work  of  production.  The  road  to  wealth 
is  alike  open  to  all.  And  neither  he  who  supinely  sits 
down  and  does  nothing,  nor  he  who  fails  in  his  attempts 
to  make  progress  in  this  path,  should  murmur  and  com- 
plain, because  others  go  on  prosperously.  Further,  he 
who  has  thus  acquired  wealth,  and  is  thus  acquiring  it,  is 
a  public  benefactor.  A  capitalist  cannot  employ  his 
wealth  productively,  without  benefitting  the  community 
in  which  he  lives.  He  helps  to  develope  the  territorial 
resources  of  the  country — he  also  gives  profitable  employ- 
ment to  its  laborers,  and  he  assists  in  bringing  into  suc- 
cessful action  those  productive  powers,  and  sustaining 
those  economical  arrangements,  with  which  the  public 
prosperity  is  closely  connected.  Do  not  the  same  indi- 
viduals who  cherish  these  prejudices  against  the  rich, 
complain,  and  with  much  more  reason  too,  if  capital  is 


9SJ  POLITICAL    ECONOMY. 

hoarded  up,  or  sent  abroad  to  be  expended  in  foreign 
countries  ? 

Neither  is  there  ground  for  prejudice  against  the  rich, 
because  a  portion  of  their  income  is  expended  in  what  are 
called  the  luxuries  of  life.  It  is  obviously  for  the  benefit 
of  the  whole  community,  that  its  members  should  be  per- 
mitted to  gratify  their  taste,  and  indulge  their  imaginary, 
no  less  than  their  real  wants.  The  prospect  of  this  in- 
dulgence is  to  most  men  the  exciting  motive  to  enterprise 
and  exertion,  and  until  some  higher  and  purer  motive 
shall  be  substituted  in  its  place,  it  is  important  that  the 
full  power  of  self  interest  be  felt. 

Inequalities  in  wealth  are  found  in  every  nation ;  and 
so  long  as  men  differ  from  each  other  in  habits  of  industry 
and  frugality — in  forethought  and  skill  and  prudence, 
there  must  be  inequalities  of  this  kind,  wherever  the  rights 
of  property  are  respected.  And  every  reflecting  man 
knows,  that  it  is  best  that  such  inequalities  should  exist. 
It  is  not  indeed  necessary,  or  desirable,  to  do  any  thing 
to  create  or  increase  them.  On  the  contrary,  the  institu- 
tions and  laws  of  a  civil  community,  should  place  every 
man  in  this  respect,  as  in  others,  on  a  perfect  equality. 
There  should  be  no  privileged  orders,  no  favorites  of  pow- 
er. So  far  as  inequalities  of  property  exist,  they  should 
be  those,  which  arise  necessarily  from  the  nature  of  man 
and  the  primary  essential  principles  of  civil  society. 

But  while  the  distinctions  of  rich  and  poor  are  found  in 
every  civilized  nation,  it  is  also  the  case,  that  no  member 
of  a  civil  community,  is,  in  the  strict  sense  of  the  word, 
independent.  If  the  poor  must  look  to  the  rich  for  capi- 
tal, by  whose  aid  their  industry  becomes  more  advanta- 
geous both  to  themselves  and  to  the  community,  the  rich 


PRACTICAL  INFERENCES.  93 

are  no  less  dependent  on  the  poor  that  their  capital  may 
be  employed  and  be  made  productive.  Of  what  avail 
also  to  the  rich  man  is  his  wealth,  were  there  no  laborers 
to  furnish  a  supply  of  those  commodities,  for  the  attain- 
ment of  which  wealth  is  desired  and  expended  ?  If  ther^  {^' 
is  any  one  truth,  taught  more  clearly  than  all  others  in  the  ^ 
science  of  Political  Economy,  it  is  the  mutual  dependence 
and  close  connexion  of  the  different  members  and  different 
classes  of  a  civil  community  upon  each  other.  "  The  eye 
cannot  say  to  the  hand,  I  have  no  need  of  thee  ;  nor  again 
the  head  to  the  feet,  I  have  no  need  of  you." 


ce  I 
njj 


From  the  principles  stated  in  this  and  the  two  preced- 
ing chapters,  we  are  led  to  the  conclusion — that  the 
wealth  and  prosperity  of  nations  are  intimately  connected 
with  simple  habits  of  life,  pure  morals  and  widely-difibsed 
intelligence.  Indeed  so  far  as  improvements  are  made  in  the 
condition  of  nations,  they  are  ultimately  to  be  traced  to 
these  causes  ;  and  the  highest  improvements  are  witness- 
ed, where  these  causes  are  in  combined  and  joint  action. 
Unfortunately,  however,  this  combination  is  rarely  found. 
Advances  in  knowledge  are  often  connected  with  declen- 
sion in  morals,  and  with  departures  from  simple  habits  of  life. 

1.  That  a  nation  may  become  great  and  powerful,  its 
members  must  be  simple  in  their  habits  of  life.  The 
strength  of  a  nation  is  in  its  laboring  population.  Here 
is  the  true  basis  of  national  greatness.  But  a  laboring 
population  to  be  efficient,  must  be  healthy  ;  and  health 
is  closely  connected  with  simplicity  of  diet  and  of  other 
habits  of  life. 

A  healthy  climate  is  often  enumerated  among  the  ter- 
ritorial advantages,  possessed  by  a  nation.     And  from  its 


94  ,  POLITICAL    ECONOMY. 

connexion  with  the  efficiency  of  human  industry,  it  de- 
serves to  be  thus  regarded  ;  where  miasmata,  or  other 
causes  of  disease,  prevail,  the  region  is  highly  unfavorable 
to  labor.  But  far  more  injurious  and  withering  to  the 
strength  of  a  nation,  is  intemperance,  or  excess  in  any 
form.  On  this  point,  we  are  not  left  to  depend  on  infer- 
ences made  from  the  principles  of  Political  Economy,  or 
of  any  other  science.  The  voice  of  history  is  loud  and 
full  in  the  testimony  which  it  bears.  If  we  look  to  the 
early  settlers  of  most  countries,  we  find  them  to  be  men 
of  simple  habits  of  life  ;  necessity  may  have  first  led  them 
into  this  course,  but  duty  and  self  interest  have  confirmed 
them  in  it.  We  find  also,  that  while  these  simple  habits 
remained,  the  amount  of  labor  accomplished,  was  greater, 
in  proportion  to  the  number  of  laborers,  than  at  any  sub- 
sequent period.  In  the  language  of  poetry,  this  portion 
of  a  nation's  history  is  sometimes  called  the  iron  age — the 
age,  whose  most  striking  features  are  hardihood  and 
strength  and  vigor  and  enterprise.  Perhaps  the  world 
has  rarely  exhibited  a  better  example  of  this  iron  age, 
than  was  seen  among  the  Puritans  of  New  England. 

But  a  simple  style  of  living  is  also  connected  with  na- 
tional advancement  in  another  way.  Frugality,  we  have, 
seen,  is  one  source  of  those  accumulations,  which  consti- 
tute the  productive  capital  of  a  nation  ;  and  in  proportion 
as  a  simple  style  of  living  prevails,  these  savings  and  ac- 
cumulations will  be  greater.  For  facts  illustrative  of  this 
statement,  I  might  again  refer  to  the  early  history  of  this 
country,  especially  as  contrasted  with  what  has  since  been 
witnessed.  It  is  generally  supposed,  that  the  amount  of 
products  consumed  in  the  daily  support  of  the  laboring 
population  of  this  country,  is  greater,  in  proportion  to  the 


PRACTICAL  INFERENCES.  95 

number  of  inhabitants,  than  in  any  other,  and  recent  in- 
vestigations have  shewn,  that  the  amount  annually  wasted 
in  ruinous  excesses,  is  immense.  There  can  be  no  doubt, 
then,  that  were  the  simple  habits  of  the  early  settlers 
found  among  their  descendants,  and  the  wasteful  excesses 
of  intemperance  stayed,  the  salutary  consequences  of  re- 
form would  soon  be  seen  in  the  advancing  wealth  and 
prosperity  of  the  nation.  Indeed,  within  a  few  years, 
much  conducive  to  national  welfare  has  in  this  way  been 
accomplished  ;  and  those  engaged  in  the  promotion  of 
this  object,  should  be  regarded  as  the  benefactors  of  their 
country.  Neither  is  it  improbable,  that  retrenchment  and 
reform  in  other  habits  of  life,  may  yet  be  made,  which 
shall  be  attended  with  like  beneficial  results  to  the  com- 
munity. 

2.  A  nation,  to  become  prosperous  and  great,  must  be 
a  virtuous  nation.  This  proposition  is  often  laid  down, 
and  its  truth  is  more  generally  allowed  than  felt.  At 
least,  many  probably  are  not  careful  to  trace  the  connex- 
ion between  pure  morals  and  national  welfare.  What  has 
just  been  said  on  simple  habits  of  living,  is  one  way,  in 
which  this  connexion  is  exhibited  ;  since  most  departures 
from  simplicity  of  style  in  the  habits  of  life,  are  vicious 
indulgences.  Another  way  in  which  this  connexion  may 
be  traced  out,  is  in  the  effect  of  the  state  of  morals  pre- 
vailing in  a  community,  on  the  habits  of  industry.  A  com- 
mon proverb  tells  us,  that  indolence  opens  the  door  for 
vice,  and  it  is  equally  true,  that  the  same  office  is  in  re- 
turn done  by  vice  for  indolence.  On  the  contrary,  a  mo- 
ral people  will  be  almost  uniformly  an  industrious  peo- 
ple. Men  labor  most  patiently  and  strenuously,  when 
the  motives  to  exertion  are  most  strongly  and  constantly 


96  POLITICAL    ECONOMY. 

felt ;  and  no  motives  are  of  stronger  and  more  uniform 
power,  than  those  of  moral  obligation.  Purity  of  morals 
is  also  closely  connected  with  that  security  and  quiet — 
that  well  ordered  and  peaceful  state  of  society,  which  in- 
vites to  enterprise  and  to  the  accumulation  and  use  of  cap- 
ital. It  is  true,  the  strong  arm  of  government  must  be  ex- 
tended for  the  protection  of  the  rights  of  person  and  of 
property,  but  the  strength  of  this  protecting  arm  is  in  the 
good  morals  of  the  community.  There  is  also  found  in  a 
healthy  moral  atmosphere,  something  that  invigorates — 
that  calls  forth  enterprise  and  effort.  Those  who  dwell 
in  the  midst  of  the  impurities  of  vice,  must  feel  the  ener- 
vating and  destructive  influences  around  them. 

It  would  be  easy  to  enlarge  on  the  different  statements 
here  made,  but  their  correctness  may  be  inferred  from  the 
principles  found  in  the  preceding  chapters.  They  are 
also  abundantly  illustrated  and  confirmed  by  what  is  seen 
in  different  communities.  Every  reflecting  and  observing 
man  knows,  that  the  tendencies  of  virtue  are  all  favorable 
both  to  individuals  and  to  nations. 

3.     A  natioh  to  become  great,  must  be  intelligent. 

I  mean  by  this  proposition,  that  there  should  be  found 
in  every  nation  men  of  science,  capable  of  investigating 
and  exhibiting  to  others,  the  laws  and  properties  of  mate- 
rial objects  around  them,  and  of  applying  what  is  thus  dis- 
covered to  the  practical  purposes  of  life  ;  and  also  that  In- 
telligence should  be  generally  diffused  among  the  various 
classes  of  society. 

The  importance  of  scientific  attainments  to  a  nation,  is 
directly  inferred  from  the  tendency  of  these  attainments, 
to  develope  and  bring  into  advantageous  action  the  natu- 
ral aids  to  production  which  exist  in  a  nation.     This  la 


CIRCULATION  OP  WEALTH.  97 

one  sense,  in  which  knowledge  is  power.     But  on  this 
topic  enough  has  already  been  said. 

The  general  diffusion  of  intelligence  among  all  classes 
of  society,  is  equally  important  to  national  prosperity. 
Labor  under  the  guidance  of  intelligence,  becomes  more 
efficient  and  profitable.  A  reading,  reflecting  people,  ca- 
pable of  understanding  the  relations  of  society,  and  of  dis- 
cerning the  different  ways  in  which  their  own  interests 
may  be  affected,  capable  also  of  arranging  and  planning 
their  business  transactions,  in  that  way,  which  may  turn 
to  the  best  account  the  resources  at  their  command,  will 
always  be  in  advance  of  those,  who  are  characterised  by 
their  ignorance  and  stupidity. 

The  importance  of  education,  both  in  its  higher  depart- 
ments, and  in  what  in  this  country  is  termed  the  common 
school  system,  is  here  seen  in  a  strong  light.  But  it  be- 
longs not  to  an  elementary  work,  to  dwell  on  the  practi- 
cal bearings  of  the  principles  it  unfolds.  PoHtical  Econo- 
my enjoins  it  upon  every  nation,  to  diffuse  the  light  of 
knowledge  through  all  classes  of  society.  It  leaches, 
that  whatever  is  thus  expended,  is  capital  well  employed, 
yielding  a  large  and  highly  profitable  revenue  to  the  public. 


CHAPTER  VI. 

Circulation  of  Wealth. 


It  has  been  stated,  that  few  members  of  a  community 
advanced  in  wealth  and  civilization,  labor  directly  for  the 
supply  of  their  own  wants.     Each  productive  laborer  con- 
fines his  efforts  to  the  furnishing  of  some  one  product,  and 
9 


98  POLITICAL    ECONOMY. 

looks  to  the  system  of  exchange,  as  the  method  by  which  he 
is  to  obtain  a  supply  of  the  various  commodities  which  he 
needs.  Of  this  system  of  exchange  as  connected  with 
the  business  of  production,  something  has  already  been 
said  in  the  chapter  on  economical  arrangements.  It  is 
here  proposed,  to  take  a  more  extended  view  of  the  cir- 
culation of  wealth,  and  to  shew  by  what  methods  and 
upon  what  principles  it  is  conducted.  This  will  require 
an  explanation  of  the  phrases — a  medium  of  exchange 
and  a  measure  of  value.  It  will  lead  also  to  inquiries 
connected  with  the  basis  and  the  variations  of  price. 
Thus  the  way  will  be  prepared  for  further  views  on  the 
subject  of  production,  and  for  the  statement  of  those  prin- 
ciples, which  are  connected  with  the  distribution  and  con- 
sumption of  wealth, 

A  medium  of  exchange. 

In  the  early  stages  of  society,  the  few  exchanges  which 
are  made,  are  effected  by  barter — that  is,  one  commodity 
is  exchanged  directly  for  another.  But  in  a  more  advanc- 
ed state — when  the  economical  arrangements  connected 
with  production  are  established,  this  direct  exchange  of 
commodities  is  attended  with  much  embarrassment  and 
difficulty.  The  farmer  may  have  on  hand  a  surplus 
amount  of  the  products  of  his  farm,  and  he  may  wish  to 
exchange  a  portion  of  this  surplus  with  some  other  pro- 
ducer— the  cabinet  maker,  for  example,  for  articles  of  fur- 
niture. But  the  cabinet  maker  has  already  perhaps  a 
sufficient  supply  of  the  produce  offered  by  the  farmer,  and 
he  himself  wishes  to  exchange  his  furniture  for  some  arti- 
cles of  grocery  in  possession  of  the  merchant.     And  thus- 


CIRCULATION  OP  WEALTH.  99 

the  business  of  exchange  becomes  embarrassed.  But,  in 
the  progress  of  society,  a  remedy  has  been  provided  for 
these  inconveniences.  There  is  a  commodity  in  common 
use,  which  every  one  is  ready  to  receive  in  return  for  what 
he  would  exchange,  and  with  which  he  is  enabled  to  ob- 
tain from  others  those  articles  which  he  wants,  and  which 
others  are  willing  to  give  away  in  exchange.  Thus,  in  the 
case  supposed,  the  farmer  exchanges  his  wheat  for  this 
commodity  which  all  are  willing  to  receive.  With  this 
commodity  he  goes  to  the  cabinet  maker,  and  obtains  from 
him  the  articles  of  furniture  he  wants.  And  then  again 
the  cabinet  maker,  by  the  aid  of  the  same  commodity,  ef- 
fects an  exchange  for  the  groceries  of  the  merchant.  Tbus 
it  is,  that  this  commodity,  which  all  are  willing  to  receive 
for  what  they  are  disposed  to  exchange,  and  by  the  aid  of 
which  all  can  obtain  the  supplies  which  they  want,  when 
these  supplies  are  in  the  market,  becomes  a  medium  of 
exchange  or,  as  it  is  sometimes  called,  a  circulating  me- 
dium. 

We  learn  from  history,  that  many  different  commodi- 
ties have  been  used  for  this  purpose.  In  some  nations, 
especially  those  but  in  part  civilized,  or  which  have  made 
but  small  advances  in  wealth,  whatever  commodity  con- 
stitutes the  larger  share  of  the  wealth  of  the  community, 
or  from  any  cause  becomes  more  frequently  than  others 
an  object  of  exchange,  is  wont  to  be  used  as  a  circulating 
medium.  Hence,  among  pastoral  tribes,  cattle  is  the  com- 
mon medium  of  exchange.  Thus  Homer  speaks  of  the 
armour  of.Diomede,  which  cost  nine  oxen,  while  that  o 
Glaucus  cost  one  hundred  oxen.  And  so,  in  later  times, 
dried  fish  in  Newfoundland,  sugar  in  the  West  Indies  andf 
tobacco  in   Virginia,  are  said    to  have  been  used  for  the 


100  POLITICAL    ECONOMY, 

purposes  of  exchange.  But  of  all  the  commodities,  that 
at  different  periods  and  in  different  parts  of  the  world, 
have  been  used  as  a  circulating  medium,  no  one  has  ful- 
filled this  office  so  extensively  and  for  so  long  a  time,  as 
the  precious  metals  in  the  form  of  money.  We  read  of 
the  shekels  of  silver,  as  current  money  with  the  merchant 
in  the  times  of  Abraham.  We  know  also,  that  in  Greece 
and  Rome,  the  metals  were  coined  and  used  for  the  same 
purpose.  And  in  later  times,  this  use  has  become  gene- 
ral among  all  civilized  nations.  I  propose  then  to  state 
some  reasons,  why  this  preference  is  given  to  the  precious 
metals  as  a  medium  of  exchange. 

1 .  They  have  a  sameness  of  quality  in  all  parts  of  the 
world.  One  grain  of  pure  gold  is  exactly  similar  to  anoth- 
er, whether  brought  from  the  mines  of  Europe  or  America, 
or  gathered  from  the  sands  of  Africa.  Neither  is  its  quali- 
ty liable  to  be  altered  by  those  causes,  which  affect  most 
other  commodities.  It  is  not  injured  by  time — it  does  not 
become  spoiled  or  decay.  Hence  the  value  of  pure  gold 
depends  on  the  quantity  alone.  We  know  that  two  grains 
are  always  worth  exactly  twice  as  much  as  one. 

2.  The  precious  metals  admit  of  minute  division  and 
exact  apportionment.  This  is  effected  by  fusion,  and  in 
this  process  nothing  is  lost ;  the  several  parts  are  equal 
to  the  whole  and  have  a  ratio  to  each  other  in  exact  pro- 
portion to  their  weight.  The  importance  of  this  proper- 
ty of  the  precious  metals,  in  adapting  them  to  the  pur- 
poses of  exchange,  will  be  readily  seen. 

3.  Another  circumstance,  which  adapts  the  precious 
metals  to  be  used  as  money,  is  their  rarity  and  the  conse- 
quent difficulty  of  their  attainment.  If  either  salt,  as  in 
Abyssinia,  or  iron,  as  in  Sparta,  were  in  general  use  at  the 


CIRCULATION  OF  WEALTH.  101 

present  time  as  a  circulating  medium,  we  see  at  once,  that 
the  quantity  required  in  a  commercial  community,  would 
be  inconvenient,  both  from  bulk  and  weight.  It  would 
be  possible  also  to  increase  the  amount  of  these  commodi- 
ties with  a  suddenness  and  to  a  degree,  which  would  at 
once  essentially  affect  their  value,  and  derange  the  busi- 
ness transactions  of  the  whole  community.  All  these  in- 
conveniences are  prevented  by  the  rareness  of  the  pre- 
cious metals  and  the  difficulty  of  their  attainment.  On  the 
other  hand,  the  precious  metals  are  not  so  rare,  that  the 
portion  of  them  required  in  the  common  transactions  of 
business,  are  too  minute  for  convenient  use.  This  might 
to  some  extent  be  the  case,  if  gold  only  were  used. 

It  will  be  readily  inferred  from  this  statement,  that  the 
continuance  of  the  use  of  gold  and  silver  as  a  medium  of 
exchange,  must  depend  in  part  on  their  rareness.  Should 
the  supply  of  them  become  much  more  abundant  than  at 
present,  it  may  be  necessary  to  resort  to  the  use  of  plati- 
na,  or  of  some  object  less  common  than  the  precious  me- 
tals. 

4.  The  precious  metals  admit  of  coinage. 

The  value  of  a  piece  of  gold  or  silver  is  determined  by 
its  fineness  and  its  weight.  It  is  necessary  therefore, 
whenever  any  portion  of  the  precious  metals  is  used  as 
money,  that  its  purity  and  its  quantity  should  be  deter- 
mined. But  to  assay  and  weigh  in  every  instance,  what 
is  given  and  received  in  the  numerous  exchanges  con- 
stantly made  in  a  commercial  community,  would  cause 
much  trouble  and  delay.  To  prevent  this  inconvenience, 
the  coinage  of  the  precious  metals  has  been  introduced. 
At  first,  this  process  consisted  only  in  impressing  a  stamp 
on  a  piece  of  metal  to' indicate  its  fineness,  leaving  the 
9* 


102  POLITICAL  ECONOMY. 

quantity  in  each  case  to  be  determined  by  weight.  Af- 
terwards, the  impression  was  made  to  cover  the  whole 
piece,  and  indicated  not  only  the  purity  of  the  metal,  but 
its  amount ;  and  then  payments  were  made  by  t-ale. 
This  process  of  coinage  is  usually  conducted  by  the  na- 
tional government,  or  by  some  body  of  men,  in  whom 
public  confidence  is  placed. 

In  the  process  of  coining,  it  is  usual  to  mix  with  the 
pure  gold  or  silver,  some  portion  of  alloy.  This  increases 
the  hardness  of  the  coins  and  prevents  their  injury  by 
wear.  This  amount  of  alloy  is  so  small,  that  in  estimat- 
ing the  weight  and  value  of  the  coins,  regard  is  had  only 
to  the  pure  gold  and  silver  they  contain. 

Such  are  the  properties  of  the  precious  metals,  by  which 
they  become  adapted,  in  the  form  of  money,  to  the  busi- 
ness of  exchange.  But  in  communities  where  a  circulat- 
ing medium  is  in  constant  use,  and  where  too  the  amount 
of  value  thus  exchanged  is  frequently  large,  and  remit- 
tances are  sometimes  to  be  made  to  distant  places,  it  has 
been  found  necessary  to  resort  to  another  expedient. 
Representatives  of  the  precious  metals  and  of  other  ob- 
jects of  value,  in  the  form  of  bank  notes  and  bills  of  ex- 
change, have  been  introduced,  and  made  to  do  the  same 
office,  as  the  precious  metals  themselves.  In  this  way, 
remittances  of  large  amount  may  be  made  to  any  distance, 
and  since  the  materials  of  which  these  representatives  are 
made,  are  light  and  cheap,  the  transportation  of  them  is 
attended  with  little  expense  or  risk,  and  the  wear  of  them 
is  too  inconsiderable  to  be  calculated  as  a  loss.  The  na- 
ture of  these  representatives  of  coined  money  will  now  be 
explained. 

1.  Bills  of  exchange,   A  bill  of  exchange  is  a  demand 


CIRCULATION  OF  WEALTH.  103 

on  some  individual,  or  (individuals  in)  company,  for  a 
definite  sum  of  money,  and  gives  to  its  possessor  a  claim 
to  receive  the  specified  amount  at  a  future  time  or  a  dis- 
tant place. 

A.,  who  is  a  merchant  in  Boston,  sends  a  cargo  of  grain 
to  Liverpool,  and  consigns  it  to  a  commercial  house  in  that 
port.  He  then  draws  a  bill  of  exchange  on  the  consignee 
for  the  amount  of  the  grain.  This  bill  of  exchange,  paya- 
ble at  sight,  or  in  a  certain  number  of  days  after  it  is  pre- 
sented, is  sold  to  another  merchant,  or  to  a  banker  in 
Boston,  and  sent  by  the  purchaser  to  Liverpool  in  pay- 
ment of  some  debt  due  in  that  city.  Thus,  by  the  aid  of 
this  bill  of  exchange,  the  exporter  of  grain  from  this  coun- 
try has  received  payment  for  his  grain,  and  the  foreign 
merchant,  who  had  exported  manufactured  products  and 
sent  them  to  this  country,  has  received  the  amount  due 
him  for  his  manufactures ;  and  the  whole  transaction,  on 
both  sides,  has  been  conducted  without  the  expense  or 
risk  attendant  on  the  transportation  of  specie. 

When  commercial  intercourse  is  carried  on  between 
two  countries  to  a  large  amount,  many  of  these  bills  of 
exchange  will  be  found  in  both,  which  will  be  brought 
into  frequent  use,  in  making  remittances  from  one  country 
to  the  other ;  and  the  saving  of  the  expense  and  risk  of 
the  transportation  of  specie,  will  give  to  these  bills  a  small 
additional  value.  If  B.,  a  merchant  in  Boston,  is  bound 
to  the  payment  of  a  debt  of  $  10,000  in  Liverpool,  and 
can  be  saved  the  trouble  and  risk  of  sending  specie  to  this 
amount  from  Boston  to  Liverpool,  he  can  afford  to  pay  a 
small  premium  for  a  bill  of  exchange. 

But  besides  this  additional  value,  which  a  bill  of  ex- 
change acquires  from  its  utility  as  a  convenient  mode  of 


104  i*oliticaL  economy. 

remittance,  its  value  is  often  affected  by  other  considera- 
tions. Sometimes  the  state  of  the  currency  in  one  coun- 
try is  less  sound  than  in  another ;  the  specie  part  of  it 
may  be  more  worn,  or  there  may  be  an  undue  proportion 
of  a  depreciated  paper  currency.  A  bill  of  exchange 
drawn  on  a  country  whose  currency  is  thus  depreciated, 
unless  other  and  stronger  reasons  prevent,  will  be  helow 
par^  or  worth  less  than  the  face  of  it.  And  when  the  cir- 
cumstances are  changed,  a  contrary  effect  is  produced, 
and  the  exchange  will  be  above  par. 

But  the  cause,  which  more  than  any  other  affects  the 
value  of  bills  of  exchange,  is  the  relative  supply  and  de- 
mand of  them,  or  the  state  of  the  exchange  market.  This 
requires  therefore  a  more  particular  statement. 

Suppose  the  amount  of  bills  drawn  on  England,  during 
the  past  year,  by  merchants  in  the  United  Stales,  to  be 
twelve  millions,  while  the  amount  drawn  by  English  mer- 
chants on  this  country,  does  not  exceed  ten  millions. 
Now,  in  adjusting  accounts,  the  ten  millions  drawn  on  one 
nation  will  obviously  meet  the  same  amount  drawn  on  the 
other,  leaving  a  balance  of  two  millions  to  be  paid  in  specie, 
or  in  some  other  way.  The  English  merchant,  then, 
finding  that  there  is  a  deficiency  of  bills  of  exchange  drawn 
on  this  country,  will  be  desirous  of  obtaining  a  sufficient 
amount  with  which  to  make  his  own  remittances ;  and 
the  same  being  the  case  in  respect  to  others,  competition 
commences :  and  thus,  on  the  principle  of  supply  and 
demand,  the  value  of  these  bills  is  increased.  But  wbile 
the  exchange  with  England  is  in  favor  of  this  country,  the 
exchange  between  the  United  States  and  France  will  per- 
haps be  against  the  former ;  and  at  the  same  time,  in  the 
commercial  transactions  between  France  and  England, 


CIRCULATION  OF  WEALTH.  105 

the  exchange  may  be  in  favor  of  England.  In  this  case, 
some  of  the  surplus  bills  on  France  in  England,  might 
be  sent  by  the  English  merchant  to  the  United  States,  in 
payment  of  debts  due,  and  then  again  be  remitted,  for  the 
same  purpose,  from  the  United  States  to  France  ;  and 
thus  an  equilibrium  would  be  restored. 

From  this  statement,  it  is  seen,  that  bills  of  exchange 
are  highly  useful  for  the  circulation  of  wealth.  But  this 
utility  is  in  practice  closely  connected  with  the  banking 
system,  in  the  account  of  which  some  further  views  of  the 
nature  of  bills  of  exchange  will  be  given. 

2.  Bank  notes,  or,  as  they  are  usually  termed  in  this 
country,  bank  bills,  are  promissory  notes,  issued  by  private 
bankers,  or  by  banking  companies,  to  pay  on  demand  a 
sum  specified  on  the  face  of  the  note.  They  are  used  in 
the  home  trade,  for  making  remittances  to  different  sec- 
tions of  the  same  c-ountry,  and  in  the  smaller  and  more 
common  business  transactions  of  the  community.  Thus, 
in  many  countries,  they  constitute  an  important  part  of 
the  national  currency. 

Rightly  to  understand  the  nature  of  this  portion  of  a 
circulating  medium,  some  knowledge  of  banks  is  required. 
I  shall  therefore  here  introduce  a  brief  account  of  these 
institutions,  exhibiting  the  manner  in  which  they  are  con- 
stituted, and  the  advantages  resulting  from  them  to  the 
community. 

The  oldest  banking  institutions  of  which  we  have  know- 
ledge, were  banJcs  of  deposit.  Of  these,  especially  of 
that  established  at  Amsterdam,  A.  Smith  has  given  a  de- 
tailed account.*     A  shorter  statement  is  here  offered. 

*  Wealth  of  Nations,  Book  4,  Chap  3, 


106  POLITICAL  ECONOMY. 

The  principal  design,  in  the  establishment  of  banks  of 
deposit,  was  to  counteract  the  effects  arising  from  a  de- 
preciated specie  currency.  The  larger  nations  of  Europe 
were  wont  to  issue  from  their  own  mints  a  large  propor- 
tion of  their  specie  currency,  and  as  any  portion  of  this 
currency  became  worn,  it  was  withdrawn  and  replaced  by 
a  new  coinage.  But  in  smaller  States,  especially  in  those 
extensively  engaged  in  commerce,  a  large  proportion  of 
the  circulating  medium  was  in  foreign  coins,  which,  not 
being  subjected  to  a  new  coinage,  became  much  worn  and 
depreciated  in  value.  Hence  bills  of  exchange  drawn  on 
merchants  in  these  States,  and  payable  in  a  depreciated 
currency,  were  of  less  value  in  the  exchange  market.  To 
meet  therefore  these  bills  of  exchange  with  a  better  cur- 
rency, the  merchants  of  these  States  made  deposits  in  a 
Bank,  established  under  the  authority  of  the  State,  and 
which  made  payment  of  all  demands  upon  it  in  a  currency 
of  the  full  standard  value. 

Another  advantage  more  closely  connected  with  the 
circulation  of  wealth,  was  also  derived  from  these  banks 
of  deposit.  Merchants  and  capitalists  in  their  business 
transactions,  made  and  received  payments  by  transfers  of 
stock  on  the  books  of  the  bank,  and  thus  the  trouble  of 
weighing  or  counting  specie,  and  of  removing  it  from  one 
place  to  another,  was  prevented. 

Banks  of  deposit  were  founded  as  early  as  1609,  and 
some  institutions  of  this  kind  continued  in  operation  till 
near  the  close  of  the  last  century.  Their  expenses  were 
defrayed  by  a  small  per  centage  on  the  transfers  of  stock, 
and  by  the  higher  value  of  bank  currency.  But  the  ad- 
vantages offered  by  these  banks  were  of  a  limited  kind, 
and  they  have  since  been  supplanted  by  banks  of  discount. 


CIRCULATION  OF  WEALTH.  107 


Banks  of  Discount. 

These  institutions  are  so  called  from  the  circumstance, 
that  a  leading  object  in  their  establishment  is  the  loan  of 
capital,  for  which  interest  is  received  under  the  name  of 
discount.  For  the  establishment  of  a  bank  of  discount,  a 
large  amount  of  capital  is  required,  which  is  usually  fur- 
nished by  individuals,  who  being  themselves  either  unable, 
or  from  some  cause  indisposed,  to  employ  their  property 
in  a  productive  manner,  prefer  to  intrust  it  to  the  care  and 
management  of  others.  Property  thus  vested,  is  bank- 
stock — those  thus  contributing  and  owning  it,  are  stock- 
holders— those  to  whom  it  is  intrusted,  are  directors.*  I 
propose  to  look  at  these  banks  principally  as  facilitating 
the  circulation  of  wealth,  and  in  this  view  I  remark, 

1 .  Banks  of  discount,  by  the  issue  of  bills,  increase  the 
circulating  medium  of  a  country. 

When  a  bank  is  first  established,  a  portion  of  its  capital 
is  paid  by  stockholders  in  specie,  and  the  whole  of  this 
specie,  or  such  part  of  it  as  the  business  of  the  bank  re- 
quires, is  kept  as  a  deposit  in  the  vaults  of  the  bank. 
Thus,  by  the  establishment  of  a  bank  of  discount,  a  por- 
tion of  the  specie  currency  is  withdrawn  from  circulation. 

♦Banks  in  the  United  States  are  private  institutions,  incorpo- 
rated for  the  more  convenient  conducting  of  their  concerns,  in 
the  same  manner,  and  on  the  same  principles,  as  manufacturing 
Companies,  and  other  similar  establishments  receive  acts  of  in- 
corporation. The  right  to  circulate  printed  notes,  payable  to 
bearer,  is  incidental,  and  conferred  by  express  Statute,  the  Bank 
paying  an  equivalent,  either  in  the  form  of  tax,  or  bonus,  to  the 
Government. 


108  POLITICAL    ECONOMY. 

To  supply  the  deficiency  thus  occasioned,  notes,  or  bills, 
are  issued  by  the  bank,  and  supposing  this  issue  of  bills  to 
be  limited  to  the  amount  of  specie  withdrawn,  the  advan- 
tage gained  would  be  the  substitution  of  representatives  of 
coined  money,  more  convenient  in  their  form  for  some  of 
the  purposes  of  exchange.  But  this  is  far  from  being  the 
case.  The  bills  issued  by  a  bank  of  discount,  usually  ex- 
ceed the  specie  in  its  vaults  by  many  times  the  amount  of 
this  specie.  Thus,  then,  an  addition  is  made  to  the  circu- 
lating medium  of  a  country. 

.  Here  perhaps  the  inquiry  will  arise,  how  this  amount 
of  bankbills  is  introduced  into  the  currency  of  the  nation  ?• 
And  to  answer  this  inquiry,  it  may  be  necessary  to  make 
a  brief  statement  of  the  manner,  in  which  the  business  of 
loaning  is  conducted  in  these  institutions.  This  may  most 
conveniently  be  done  by  the  aid  of  an  example.  Suppose 
a  wholesale  merchant  to  sell  goods  to  a  retailer,  to  the 
amount  of  $  2,000,  on  three  months  credit,  and  to  receive 
his  note,  payable  at  that  time.  This  note,  which  is  called 
commercial  paper,  is  then  presented  to  the  bank  with 
added  securities  for  its  payment,  and  there  discounted — 
that  is,  the  bank  advances  to  the  v/holesale  merchant  the 
present  w^orth  of  the  note,  which  is  the  face  of  it,  deduct- 
ing the  discount.  After  the  time  of  credit  has  expired, 
the  full  amount  of  the  note  is  paid  by  the  retailer,  or  his 
securities,  to  the  bank.  Now  it  is  in  connexion  with  these 
transactions  that  the  bills  of  the  bank  are  put  into  circula- 
tion ;  for  of  the  $  2,000  advanced  by  the  bank  to  the 
wholesale  merchant,  a  large  proportion,  or  the  whole 
amount,  is  in  its  own  bills,  while  but  a  small  proportion, 
and  perhaps  none,  of  the  return  payment,  made  by  the  . 
retail  merchant,  is  in  the  bills  of  the  bank.     And  thus  as 


CIRCULATION  OF  WEALTH.  109 

commercial  paper  is  continually  received  and  advances 
made  upon  it,  opportunity  is  offered  to  a  bank  to  put  in 
circulation  any  amount  of  its  own  bills  it  may  deem  safe 
and  for  its  interest. 

But  bank  bills  have  been  spoken  of  as  the  representa- 
tives of  specie  and  other  objects  of  intrinsic  value.  What 
values  then,  it  may  be  asked,  are  represented  by  that  por- 
tion of  these  notes,  which  are  in  excess  of  the  specie  in 
the  vaults  of  the  bank.  Suppose,  for  example,  a  bank, 
whose  capital  is  $100,000,  has  on  hand  specie  to  the 
amount  of  $20,000,  and  bills  in  circulation  to  twice  the 
amount  of  its  capital.  The  inquiry  is,  what  values  are 
represented  by  the  $180,000  of  excess.  I  answer,  the 
values,  which,  in  the  form  of  commercial  paper,  are 
pledged  to  the  bank  in  payment  of  sums  advanced  by  it. 
These  values  thus  pledged,  and  thus  represented,  are  the 
real  and  personal  estates  of  all  those  individuals,  whose 
names,  as  principals,  or  securities,  are  found  on  the  com- 
mercial paper,  for  the  time  being,  in  possession  of  the 
bank.  Hence,  then,  should  the  bills  of  the  bank  be  re- 
turned upon  it,  with  a  demand  of  promised  payment, 
every  solvent  and  well  regulated  institution  will  be  able 
to  meet  this  demand,  if  not  immediately,  within  a  short 
period — that  is,  when  its  commercial  paper  becomes  due. 
And  it  may  here  be  remarked  that  the  basis,  on  which 
the  operations  of  a  bank  of  discount  are  conducted,  is  a 
calculation  of  probabilities.  Those  conducting  its  affairs, 
know  the  amount  of  specie  on  hand.  They  know  also  the 
amount  of  funds  deposited  in  the  bank,  and  are  able  to 
form  an  opinion  as  to  the  continuance  of  these  deposits, 
and  of  their  probable  increase  or  diminution.  They  know 
also  the  amount  of  commercial  paper,  becoming  due  at 
10 


110  POLITICAL    ECONOMY. 

different  periods,  and  from  their  acquaintance  with  the 
course  of  trade,  they  can  judge  to  what  extent  demands 
for  the  discount  of  commercial  paper  will  be  made.  And 
from  these  several  premises,  most  of  which,  it  will  be  no- 
ticed, are  of  the  nature  of  probabilities,  the  directors  of  a 
bank  are  able  to  determine,  what  amount  of  specie  it  is 
necessary  to  keep  on  hand,  and  also  what  amount  of  bills 
it  is  safe  to  keep  in  circulation,  and  generally,  in  what 
manner  the  affairs  of  the  institution  should  be  conducted. 

2.  Banks  of  discount  offer  facilities  for  the  circulation 
of  wealth,  in  the  forms  of  bank-credits,  drafts,  checks  and 
other  expedients  of  a  similar  nature. 

The  remittance  of  large  amounts  of  specie  from  one 
section  of  a  country  to  another,  is  attended  with  expense 
and  risk ;  neither  is  the  trouble  and  labor  small,  of  weigh- 
ing, or  counting,  and  delivering  into  the  possession  of 
another,  large  quantities  of  specie,  when  not  transported 
to  a  distant  place.  Now  in  communities  where  a  well  es- 
tablished system  of  banking  is  found,  consisting  either  of 
local  banks,  or  a  national  bank  and  its  branches,  or  of 
both,  this  trouble  and  expense  and  risk,  are  saved.  And 
this  is  effected,  not  by  bank  bills  merely,  or  principally, 
but  by  other  expedients,  more  or  less  connected  with  the 
banking  system.  Such  are  transfers  of  credit  on  the  books 
of  a  bank,  bank-checks,  drafts,  he.  To  these  we  may 
add  notes  of  hand  and  bills  of  exchange,  which  become 
part  of  the  circulating,  or  rather  commercial  medium  of  a 
country  principally  through  the  instrumentality  of  banks. 
The  amount  of  values,  whose  ownership  is  daily  transfer- 
red by  these  expedients  in  a  large  commercial  nation,  ex- 
ceeds, many  times,  the  exchanges  effected  by  the  circu- 
lating medium  of  the  nation,  both  in  the  form  of  specie 


CIRCULATION  OF  WEALTH.  Ill 

and  bills.     In  this  way,  then,  banks  offer  further  facilities 
for  the  circulation  of  wealth. 

The  question  may  here  arise,  how  far  banks  are  essen- 
tial as  a  part  of  a  system  of  exchange  ?  Some  have  sup- 
posed them  unnecessary,  and  that  transfers  of  value  might 
be  made  by  notes  of  hand,  bills  of  exchange,  drafts  on  in- 
dividuals, &c.  without  any  assistance  from  banks.  And 
this  opinion  is  probably  correct.  The  basis  of  the  whole 
system  of  credit  currency  is  mutual  confidence.  So  long  as 
men  put  this  confidence  in  notes  of  hand,  bills  of  ex- 
change &c.  they  may  form  a  part  of  this  currency,  and  no 
longer.  And  the  same  is  true  of  bank  bills  ;  so  long  as  there 
is  confidence  reposed  in  them  as  the  representatives  of  value, 
they  are  current,  and  when  this  confidence  ceases  to  .be 
felt,  they  will  no  longer  form  a  part  of  the  circulating  me- 
dium. At  least,  this  will  be  the  case  with  that  part  of 
the  bank  bill  currency,  which  is  in  excess  of  specie  in  the 
vaults  of  the  bank.  Hence,  then,  a  paper  credit  curren- 
cy might  exist  without  banks  or  bank  bills,  so  long  as  it 
has  this  mutual  confidence,  on  which  to  rest.  But  a  sys- 
tem of  exchange  thus  conducted,  would  be  attended  with 
far  less  convenience  to  the  public.  At  least  the  offices 
now  rendered,  by  banks,  in  connexion  with  a  commercial 
medium  of  the  kind  stated  above,  must  then  be  rendered 
by  individuals,  or  by  companies  established  for  these  pur- 
poses. 

To  form  a.  just  estimate  of  the  service  rendered  to  the 
community  by  banks,  so  far  as  they  aid  in  the  circulation 
of  wealth,  the  necessity  of  an  increasing  currency,  corres- 
ponding to  the  progress  of  a  nation  in  wealth  and  com- 
mercial business,  should  be  taken  into  the  account.  Were 
the  circulating  medium  of  a  nation  restricted  to  specie,  it 


112 


POLITICAL  ECONOMY. 


would  be  necessary,  that  as  the  amount  of  wealth  to  be 
circulated  increases,  either  the  value,  or  the  amount,  of 
this  currency  should  in  a  corresponding  degree  become 
greater.  Suppose  the  amount  of  specie  in  this  country 
to  be  no  greater  than  it  was  fifty  years  ago,  and  no  paper 
currency  to  be  in  use.  In  that  case,  the  value  of  a  dollar 
would  be  perhaps  tenfold  greater,  than  at  the  present  time, 
that  is,  it  would  exchange  for  ten  times  the  amount  of 
commodities  in  the  market,  and  other  coins,  both  of  gold 
and  silver,  would  increase  in  value  in  like  proportion. 
This,  it  is  easily  seen,  would  be  attended  with  inconven- 
ience, especially  in  the  circulation  of  the  smaller  denom- 
inations of  coin.  Or  if,  to  prevent  this  increased  value 
of  specie  currency,  it  were  attempted  to  furnish  a  supply, 
corresponding  to  the  greater  demand,  the  attempt  would 
require  a  large  amount  of  capital  and  labor,  now  product- 
ively employed  in  other  ways ;  and  even  then  the  attempt 
perhaps  might  prove  unsuccessful.  Banks  then,  as  they 
furnish  the  additional  currency  needed,  with  little  expense 
to  the  community,  are  of  important  service. 

So  far  I  have  spoken  of  banks  of  discount,  as  connected 
with  the  circulation  of  wealth.  There  are  other  advan- 
tages arising  from  them,  to  some  of  which  J  shall  now 
briefly  refer. 

1 .  They  present  a  profitable  and  safe  opportunity  for 
investing  capital. 

Men  of  large  capital  often  wish  to  be  relieved  in  whole, 
or  in  part,  from  the -trouble  and  care  of  employing  this 
capital,  or  of  loaning  to  others.  There  is  also  in  every 
community,  a  class  of  capitalists,  who  need  the  assistance 
of  others  in  making  their  property  productive.  Such  are 
those,  who  from  age,  or  any  disability,  have  retired  from 


CIRCULATION  OF  WEALTH. 


113 


business — minors,  whose  support  is  to  be  derived  from 
funded  property,  and  eleemosynary  institutions.  To  all 
such,  a  bank  investment  is  the  most  favorable  that  can  be 
found.  If  the  institution  is  properly  managed,  property, 
thus  vested,  is  safe,  and  yields  a  revenue,  equal  to  the  usual 
interest  of  money,  and  sometimes  exceeding  it.  It  is  also 
easily  transferable.  Bank-stock  is  generally  at  'par,  and 
often  above. 

2.  They  increase  the  amount  of  productive  capital  in  a 
nation. 

This  result,  to  some  extent,  follows  from  the  preceding. 
From  the  opportunity  offered  by  banks  for  the  convenient 
and  safe  investment  of  capital,  a  much  larger  amount  of 
individual  revenues  is  saved,  and  becomes  a  part  of  the 
national  productive  capital,  than  would  otherwise  have 
been  the  case.  Especially  is  this  amount  large,  where 
Savings  Banks  are  established,  whose  funds  are  usually 
placed  under  the  management  of  banks  of  discount.  Many 
millions  of  dollars  have  in  this  way  been  added  to  the  cap- 
ital of  the  United  States  within  a  few  years,  which  other- 
wise would  probably  have  been  unproductively  spent. 

3.  Banks  render  the  capital  of  a  nation  more  pro- 
ductive. 

This  results  from  the  circumstance,  that  Banks  are  a 
medium  of  communication  between  the  wealthy  classes  of 
society  and  the  industrious  and  enterprising,  enabling  those 
who  can  offer  good  securities,  to  avail  themselves  of  cap- 
ital for  processes  of  production.  The  capital  of  a  nation 
is  also  rendered  more  productive,  by  the  quick  returns  ob- 
tained for  products  through  their  instrumentality.  The 
manufacturer,  for  example,  who  disposes  of  his  wares  on  a 
credit  of  sixty  or  ninety  days,  might  find  himself  erabar- 
10* 


114  POLITICAL  ECONOMY. 

rassed,  if  obliged  to  wait  this  time  for  the  return  of  his 
capital.  He  might  even  find  it  necessary  to  suspend  the 
operations  of  his  manufactory  and  to  dismiss  his  workmen. 
Or  to  prevent  this,  he  might  be  obliged  to  apportion  his 
capital  differently,  and  to  conduct  his  business  on  a  smal- 
ler scale.  To  free  himself  from  these  inconveniences,  he 
offers  his  notes  to  the  Bank,  and  receives  at  once  their 
present  worth,  and  thus  is  enabled  to  make  all  necessary 
advances  for  conducting  his  business. 

It  may  be  further  added,  in  this  connexion,  that  the 
prompt  and  punctual  habits  of  business,  which  are  found 
wherever  banks  are  in  operation,  are  highly  favorable  to 
the  productive  powers  of  a  community.  At  least,  where 
these  institutions  exist,  payments  are  more  promptly  made, 
and  the  productive  capital  of  the  community  is  turned  to 
better  account. 

These  statements,  shewing  the  different  ways,  in  which 
banks  of  discount  aid  in  economising  capital,  should  be  ac- 
companied with  the  remark,  that  though  they  may  econo- 
mise, they  cannot  create  capital,  where  it  does  not  already 
^xist.  Neither  is  it  wise  to  attempt  the  establishment  of 
a  bank  in  a  part  of  the  country,  where  the  amount  of 
business  is  not  sufficient  to  give  employment  to  the  capi- 
tal thus  funded  ;  for  it  should  ever  be  remembered,  that 
capital,  to  yield  a  revenue,  must  be  productively  employed. 
The  unsuccessful  attempts  sometimes  made,  to  establish 
banks  in  sections  of  the  country  where  they  are  not  need- 
ed, shew  that  these  considerations  do  not  always  receive 
the  attention  they  merit. 

It  will  be  noticed,  that  the  view  here  taken  of  banks 
of  discount  relates  to  their  direct  influence  on  the  econom- 
ical interests  of  the  community.     The  objection  is  some- 


CIRCULATION  OF  WEALTH.  115 

times  brought  against  these  institutions,  that  they  are  dan- 
gerous to  the  liberties  of  a  nation,  especially  as  they  are 
found  in  free  States.  Money,  it  is  said,  is  power ;  and  if 
this  power  be  in  the  hands  of  a  banking  company  distinct 
from  the  government  of  the  country,  it  may,  for  sinister 
ends,  oppose  and  thwart  those  measures,  which  are  requir- 
ed by  the  public  good.  If,  on  the  contrary,  this  power  is 
exercised  by  the  government  itself,  it  may  be  used  to  op- 
press and  injure  its  subjects.  In  either  case  then  it  is  lia- 
ble to  be  abused.  In  reply  it  may  be  said,  that  it  is  ob- 
vious that  these  abuses  of  the  power  conferred  by  money, 
are  not  in  their  nature  necessarily  connected  with  banking 
companies  ;  money  might  still  be  accumulated  and  these 
abuses  exist,  where  banks  are  not  found.  Still,  if  there  is 
connected  with  banking  institutions  a  peculiar  liability  to 
abuses  of  this  nature,  so  far  there  is  an  objection  to  their 
establishment  in  a  free  state.  At  least,  this  consideration 
should  lead  to  peculiar  watchfulness  and  care. 

Measure  of  value. 

Objects  have  value  attached  to  them,  either  because 
they  are  adapted  to  the  supply  of  human  wants,  or  be- 
cause they  may  be  used  in  obtaining  a  supply  of  these 
wants.  A  distinction  is  made  between  value  in  use  and 
value  in  exchange.  Whatever  a  man  possesses  which  is 
useful  to  him,  may  be  said  to  have  a  value  in  use,  but  of  the 
objects  thus  possessed,  those  only  have  a  value  in  exchange, 
for  which  others  are  willing  to  give  objects  which  are  ac- 
counted valuable,  in  return.  Water  is  highly  useful ;  it 
has  therefore  a  value  in  use.  But  where,  as  is  the  case  in 
most  parts  of  the  world,  an  unlimited  supply  of  it  may  be 


116  POLITICAL    ECONOMY. 

obtained  with  little  or  no  trouble,  it  has  no  value  in  ex- 
change— no  one  will  give  any  thing  in  return  for  it.  But 
change  the  circumstances  in  which  it  is  found, — let  the 
supply  of  water  become  limited,  or  let  its  attainment  be 
attended  with  difficulty,  or  require  labor,  and  it  begins  at 
once  to  have  a  value  in  exchange.  Now  it  is  with  those 
commodities  only  which  have  exchangeable  value,  that 
our  inquiries  are  concerned.  And  here  the  different  cir- 
cumstances which  are  requisite,  that  objects  may  have  ex- 
changeable value,  may  be  noticed.  1.  There  must  be  a 
limitation  in  the  supply  of  them ;  nobody  will  give  value 
in  exchange  for  that  of  which  there  is  an  unlimited  sup- 
ply. 2.  Their  attainment  must  be  attended  with  some 
sacrifice,  or  labor  ;  otherwise,  no  one  will  be  willing  to  give 
in  exchange  for  them  commodities,  which  have  cost  labor 
or  some  sacrifice.  3.  There  must  be  a  demand  for 
them  ;  a  commodity,  of  which  there  is  a  limited  sup- 
ply, may  have  been  acquired  by  its  possessor  with  much 
labor,  and  he  may  value  it  as  highly  useful  to  himself, 
but  if  there  is  no  demand  for  it — if  no  one  else  wants 
it,  or  is  willing  to  give  that  which  is  valuable  in  exchange 
for  it,  this  commodity  will  have  no  value  in  exchange. 

Another  point  may  here  be  noticed — that  the  ex- 
changeable value  attached  to  any  object,  will  depend  on 
the  amount  of  other  objects,  for  which  it  may  be  exchang- 
ed— in  other  words,  that  this  exchangeable  value  is  alto- 
gether a  relative  value.  B.  has  a  piece  of  broadcloth. 
This  broadcloth  has  to  its  owner  a  value  in  use — but 
the  amount  of  this  value  in  use  no  one  can  estimate. 
The  broadcloth  has  also  a  value  in  exchange.  It  may 
be  exchanged  for  thirty  bushels  of  wheat, — for  forty 
yards  of  flannel, — for  six  hats,  &c.     And  should  it  be 


CIRCULATION  OF  WEALTH. 


117 


asked,  what  is  the  exchangeable  value  of  this  piece  of 
broadcloth  ?  the  only  way  to  answer  this  inquiry,  is 
thus  to  make  an  enumeration  of  the  different  objects, 
with  the  amount  of  each,  for  which  the  broadcloth  might 
be  exchanged.  This  to  be  sure  is  attended  with  some 
trouble,  and  might  not  give  any  very  definite  view  of  the 
exchangeable  value  of  the  article,  but  it  is  the  only  way 
in  which  this  value  is  to  be  determined.  When  however 
we  come  to  make  frequent  exchanges  of  commodities,  the 
necessity  of  something  more  definite,  and  which  may  ena- 
ble us  to  institute  a  comparison  between  different  commo- 
dities,, as  to  their  exchangeable  value,  is  felt.  We  want 
a  measure  of  value — something,  which  in  respect  to  the 
comparative  value  of  objects,  shall  answer  the  same  pur- 
pose, that  a  yard-stick,  or  a  foot-rule,  does  in  comparing 
the  length  of  bodies. 

To  meet  this  want — that  is,  to  find  some  commodity, 
which  shall  be  a  perfect  measure  of  value,  has  ever  been 
a  perplexing  problem  to  political  economists.  Adam 
Smith  proposes,  that  human  labor  should  be  taken  as  a 
measure  of  value.  Others  have  proposed  wheat ;  others, 
money.  It  is  unnecessary  to  examine  in  detail  the  state- 
ments and  arguments  of  writers,  in  support  of  their  differ- 
ent proposed  measures  of  value.  One  insuperable  ob- 
jection exists  to  these  objects,  and  to  all  that  have  ever 
been  proposed.  They  are  in  themselves  variable,  and 
this  can  never  be  true  of  any  accurate  measure  of  value. 
The  exchangeable  value  of  wheat  is  not  only  liable  to 
be  affected  annually,  as  the  season  is  more  or  less  favorable 
to  its  production  ;  but  improved  methods  of  cultivation 
and  many  other  causes  may  affect  it.  Human  labor,  also, 
is  worth  more  or  less,  according  to  the  circurpstances  under 


118 


POLITICAL    ECONOMY. 


which  it  is  performed,  or  the  skill  which  is  put  forth.  It 
feels  too  all  the  modifying  influences  of  relative  supply 
and  demand.  Money  is  perhaps  less  subject  to  these  va- 
riations of  value  than  the  other  objects  proposed,  and  being, 
from  several  circumstances,  which  will  hereafter  be  stated, 
better  fitted  to  become  a  measure  of  value,  is  practically 
in  use  for  this  purpose.  But  that  money  in  the  form  of  the 
precious  metals,  or  of  their  representatives — bank-notes 
or  bills  of  exchange,  is  not  a  perfect  measure  of  value, 
may  be  learnt  from  the  following  statements,  which, 
though  they  anticipate  in  part  what  is  afterwards  said  on 
the  subject  of  price,  are  here  introduced,  as  showing  more 
fully  the  nature  and  uses  of  money. 

1.  The  value  of  money  will  vary  with  the  labor  and 
expense  required  to  obtain  it,  that  is,  with  the  cost  of  its 
production.  As  this  remark  relates  to  the  material  of 
money,  it  can  apply  only  to  a  specie  currency. 

2.  The  value  of  money  will  vary  with  variations  in  the 
proportion  of  the  amount  found  at  any  time  in  a  na- 
tion to  the  amount  required  for  the  purposes  of  a  circu- 
lating medium,  or,  as  it  is  more  commonly  expressed, 
with  the  relative  variations  of  supply  and  demand. 

3.  Money  is  subject  to  nominal  variations. 

It  might  be  sufficient,  in  support  of  the  first  and  second 
proposition,  to  say,  that  money  is  subject  to  the  same  in- 
fluences as  affect  the  value  of  other  commodities,  and  to 
refer  to  what  is  afterwards  said  upon  the  subject  of  price. 
But  I  prefer  to  improve  the  opportunity,  to  offer  some 
historical  illustrations,  with  which  it  is  important  to  be- 
come acquainted. 

When  the  mines  of  South  America  were  first  known  to 
the  inhabitants  of  Europe,  and  large  amounts  of  gold  and 


CIRCULATION  OF  WEALTH.  119 

silver  were  received  from  them,  there  was  an  immediate 
depreciation  in  the  value  of  these  metals.  The  cost  of 
their  production  was  less,  and  the  supply  in  proportion 
to  the  demand,  became  more  abundant ;  from  both  these 
causes  therefore  their  value  became  less.  This  depre- 
ciation, in  the  case  of  silver,  has  been  usually  estimated 
as  tenfold,  so  that  an  ounce  of  silver,  after  the  discovery  of 
these  mines,  would  exchange  for  only  one  tenth  of  the  com- 
modities, for  which  it  had  been  previously  exchanged.  But 
while  this  increased  supply  at  a  diminished  cost,  tend- 
ed to  diminish  in  the  proportion  above  stated,  the  value 
of  silver,  another  cause  came  into  operation,  which  tend- 
ed to  raise  its  value.  This  cause  was  a  demand  for  a 
larger  circulating  medium.  The  discovery  of  America 
and  of  the  passage  around  the  Cape  of  Good  Hope,  made 
about  the  same  time,  by  exciting  the  enterprise  of  the  na- 
tions of  Europe,  and  opening  new  and  advantageous  fields 
for  the  employment  of  their  capital  and  labor,  increased 
to  an  important  extent,  the  business  transactions  of  the 
old  world.  The  wealth  of  the  different  European  nations 
became  greater,  and  as  there  was  more  value  to  be  trans- 
ferred from  one  individual  to  another,  and  transfers  were 
more  frequently  made,  it  became  necessary,  that  the  cir- 
culating medium  of  these  nations  should  be  enlarged. 
And  thus  a  portion  of  the  larger  supply,  furnished  by  the 
new  mines,  was  absorbed  by  the  demand  for  a  larger  cir- 
culating medium.  Hence  it  is,  that  the  depreciation  in 
the  value  of  silver,  which  occurred  at  this  period,  instead 
of  being  tenfold,  as  before  stated,  was  only  threefold,  that 
is,  an  ounce  of  silver,  instead  of  being  estimated  at  one 
tenth  of  its  former  value,  was  reckoned  at  one  third  of 
this  value ;  and  this  allowance  is  usually  made,  in  esti- 


120  POLITICAL    ECONOMY. 

mating  the  value  of  sums  stated  in  silver  currency  before 
the  year  1520.  When  the  currency  is  gold,  the  depre- 
ciation is  estimated  at  one  fourth. 

The  state  of  the  circulating  medium  in  England,  from 
the  year  1797  till  1819,  during  which  interval  the  bills 
of  the  bank  of  England  were  not  redeemed  in  specie,  but 
were  made  a  legal  tender  by  act  of  Parliament,  offers 
further  illustration  and  proof  of  these  propositions.  At  the 
period  to  which  I  refer,  the  circulating  medium  of  England 
consisted  of  a  small  proportion  of  gold  and  silver,  of  the 
notes  of  the  country  banks,  which  were  redeemable,  and 
of  the  notes  of  the  bank  of  England,  which  were  not  re- 
deemable. But  so  great  was  the  demand  for  a  circulating 
medium  arising  from  the  immense  amount  of  the  business 
transactions  of  that  country,  that  so  long  as  the  bank  of 
England  restricted  itself  to  a  moderate  issue  of  its  notes, 
the  value  of  the  whole  currency  was  sustained,  and  this 
too,  even  when  the  subsidising  of  foreign  troops  had  drain- 
ed the  country  of  its  gold  and  silver  coins.  In  this  case, 
then,  the  notes  of  the  bank  of  England  had  a  value,  not 
as  the  representatives  of  specie,  nor  as  the  representatives 
of  other  values,  pledged  for  their  redemption.  They  had 
an  intrinsic  value  of  their  own,  arising  from  their  utility, 
and  dependent,  as  to  its  intenseness,  on  demand  and  sup- 
ply. 

From  these  statemei^s,  the  inference  is  made,  that  the 
value  of  money  depends  on  the  same  causes,  as  the  value  - 
of  other  commodities,  and  of  course  is  fluctuating. 

The  same  inference  is  also  to  be  drawn  from  the  fact, 
that  money  is  imported  and  exported  by  merchants,  on 
the  same  principlesj  and  in  the  same  manner,  as  other  ar- 
ticles of  merchandise.     When  the  precious  metals  are 


CIRCULATION  OF  WEALTH.  121 

more  abundant,  and  on  that  account  cheaper,  in  a  foreign 
country,  than  in  his  own,  the  exporter,  who  has  carried 
abroad  a  cargo  of  the  staple  commodities  of  his  own  coun- 
try, brings  back  in  return  gold  and  silver,  either  coined, 
or  in  bullion.  He  does  so,  because  it  is  the  most  profita- 
ble importation  he  can  make.  And  so,  if  specie  is  more 
abundant  in  his  own  country,  in  proportion  to  the  demand 
for  it,  than  in  foreign  countries,  and  on  this  account  cheap- 
er, he  sends  it  abroad,  just  as  he  would  any  other  commod- 
ity, of  which  there  is  a  surplus  in  the  market. 

I  now  proceed  to  consider  my  third  proposition,  that 
money  is  subject  to  nominal  variations  of  value. 

By  nominal  variations,  I  mean  those  variations,  which 
result  from  changes  in  the  denominations  of  coined  money. 
The  governments  of  different  countries,  supposing  that  the 
credit  and  currency  of  the  circulating  medium  are  depen- 
dent on  their  acts  of  authority,  and  not  upon  its  own 
intrinsic  value,  have  taken  it  upon  themselves  at  differ- 
ent times,  to  alter,  or  as  they  were  wont  to  term  it,  to  raise 
this  standard  of  value.  In  doing  this,  they  have  some- 
times diminished  the  size  and  weight  of  coins,  causing 
them  still  to  retain  the  same  name.  In  other  instances, 
they  have  introduced  a  larger  portion  of  alloy ;  and  then 
again  they  have  altered  the  denomination  of  the  coin, 
calling  that  a  dollar,  for  example,  which  before  had  been 
denominated  a  half  dollar.  In  these  several  cases,,  it  is  at 
once  seen,  the  result  was  the  same — a  less  amount  of  gold 
or  silver  was  found  under  the  same  denomination.  The 
object  to  be  attained  by  making  these  changes,  has  also, 
in  most  instances,  been  the  same.  The  governments  by 
whom  they  have  been  made,  have  in  this  w^ay  paid  their 
debts  at  reduced  rates,  thus  defrauding  their  creditora  of 

a 


122  POLITICAL    ECONOMY. 

their  just  dues.  Such  variations  in  the  nominal  value  of 
coins,  which  are  evidently  acts  of  fraud  and  injustice,  are 
soon  known,  and  the  discovery  is  followed  by  corres- 
ponding changes  in  the  price  of  all  commodities  in 
the  cominunhy.  In  a  short  time,  the  depreciated  coins 
are  found  passing  only  for  their  real  worth,  which  is  de- 
termined by  the  amount  of  gold  and  silver  which  they 
contain.  Unless,  however,  these  variations  are  known, 
and  a  due  allowance  made  for  them,  the  reader  of  history, 
or  whoever  may  attempt  to  compare  values  at  different 
periods,  will  be  liable  to  mistake.  On  this  point  I  take 
the  liberty  to  introduce  the  following  instructive  paragraph 
from  Smith's  Wealth  of  Nations. 

"  The  denominations  of  coins  seem  originally  to  have  ex- 
pressed the  weight  or  quantity  of  metal  contained  in  them. 
In  the  time  of  Servius  Tullius,  who  first  coined  money  at 
Rome,  the  Roman  As  or  Pondo  contained  a  Roman  pound 
of  good  copper.  It  was  divided  in  the  same  manner  as 
our  Troyes  pound,  into  twelve  ounces,  each  of  which  con- 
tained a  real  ounce  of  good  copper.  The  English  pound 
sterling  in  the  time  of  Edward  I.  contained  a  pound  Tow- 
er weight,  of  silver  of  a  known  fineness.  The  Tower 
pound  seems  to  have  been  something  more  than  the  Ro- 
man pound,  and  something  less  than  the  Troyes  pound. 
This  last  was  not  introduced  into  the  Mint  of  England  till 
the  18th  of  Henry  VIII.  The  French  livre  contained  in 
the  time  of  Charlemagne  a  pound,  Troyes  weight,  of  sil- 
ver of  a  known  fineness.  The  fair  of  Troyes  in  Cham-' 
paign  was  at  that  time  frequented  by  all  the  nations* of 
Europe,  and  the  weights  and  measures  of  so  famous  a 
market  were  generally  known  and  esteemed.  The  Scots 
money  pound  contained  from  the  time  of  Ale^^ander  the 


CIRCULATION  OF  WEALTH.  123 

First  to  that  of  Robert  Bruce,  a  pound  of  silver  of  the 
same  weight  and  fineness  with  the  English  pound  sterling. 
English,  French,  and  Scots  pennies  too,  contained  all  of 
them  originally  a  real  pennyweight  of  silver,  the  twentieth 
part  of  an  ounce,  and  the  two  hundred-and-fortieth  part  of  a 
pound.  The  shilling  too,  seems  originally  to  have  been  the 
denomination  of  a  weight.  When  wheat  is  at  twelve  shil- 
lings the  quarter,  says  an  ancient  statute  of  Henry  III. 
then  wastel  bread  of  a  farthing  shall  weigh  eleven  shil- 
lings and  four  pence.  The  proportion,  however,  between 
the  shilling  and  either  the  penny  on  the  one  hand,  or  the 
pound  on  the  other,  seems  not  to  have  been  so  constant 
and  uniform  as  that  between  the  penny  and  the  pound. 
During  the  first  race  of  the  kings  of  France,  the  French 
sou  or  shilling  appears  upon  different  occasions  to  have 
contained  five,  twelve,  twenty,  and  forty  pennies.  Among 
the  ancient  Saxons  a  shilling  appears  at  one  time  to  have 
contained  only  five  pennies,  and  it  is  not  improbable  that 
it  may  have  been  as  variable  among  them  as  among  their 
neighbours  the  ancient  Franks.  From  the  time  of  Charle- 
magne among  the  French,  and  from  that  of  William  the 
conqueror  among  the  English,  the  proportion  between  the 
pound,  the  shilling,  and  the  penny,  seems  to  have  been 
uniformly  the  same  as  at  present,  though  the  value  of  each 
has  been  very  different.  For  in  every  country  of  the 
world,  I  believe,  the  avarice  and  injustice  of  princes  and 
sovereign  states,  abusing  the  confidence  of  their  subjects, 
have  by  degrees  diminished  the  real  quantity  of  metal, 
which  had  been  originally  contained  in  their  coins.  The 
Roman  As,  in  the  latter  ages  of  the  Republic,  was  reduc- 
ed to  the  twenty-fourth  part  of  its  original  value  ;  and,  in- 
stead of  weighing  a  pound,  came  to  weigh  only  liaif  aa 


12^  POLITICAL  ECONOMY. 

ounce.  The  English  pound  and  penny  contain  at  present 
about  a  third  only ;  the  Scots  pound  and  penny  about  a 
thirty-sixth  ;  and  the  French  pound  and  penny  about  a 
sixty-sixth  part  of  their  original  value.  By  means  of 
those  operations  the  princes  and  sovereign  states  which 
performed  them,  were  enabled,  in  appearance,  to  pay 
their  debts  and  fulfil  their  engagements  with  a  smaller 
quantity  of  silver  than  would  otherwise  have  been  requi- 
site. It  was  indeed  in  appearance  only ;  for  their  credit- 
ors were  really  defrauded  of  a  part  of  what  was  due  to 
them.  All  other  debtors  in  the  state  were  allowed  the 
same  privilege,  and  might  pay  with  the  same  nominal  sum 
of  the  new  and  debased  coin  whatever  they  had  borrowed 
in  the  old.  Such  operations,  therefore,  have  always 
proved  favourable  to  the  debtor,  and  ruinous  to  the  cred- 
itor ;  and  have  sometimes  produced  a  greater  and  more 
universal  revolution  in  the  fortunes  of  private  persons, 
than  could  have  been  occasioned  by  a  very  great  public 
calamity." 

It  has  now  been  fully  shewn,  that  money,  being  itself 
fluctuating  as  to  its  own  value,  can  never  become  an  inva- 
riable standard  of  value.  Still,  as  before  intimated,  it  an- 
swers this  purpose  in  the  common  transactions  of  business. 
If  at  the  same  time  and  place,  I  wish  to  institute  a  com- 
parison between  two  different  commodities,  I  am  enabled 
to  do  this,  by  stating  the  price  of  each.  And  since  we 
are  accustomed  to  express  the  value  of  commodities  in 
money,  this  is  easily  and  readily  done.  But  if  I  knew 
the  price  of  a  commodity  in  England  five  hundred  years 
ago,  and  also  its  |>resent  price,  or  if,  at  the  present  time, 
I  knew  the  value  of  one  commodity  in  this  country,  and 
of  another  in  China,  I  should  not  thus  be  enabled,  iq  ei^ 


PRICE. 


125 


iher  case,  without  other  data,  and  other  calculations,  to 
form  a  comparison  of  the  value  of  these  commodities.  In 
these  instances,  money  is  not  a  measure  of  value. 


CHAPTER  VIL 

Price. 

Having  thus  explained  what  is  meant  by  a  circulating 
medium,  and  by  a  measure  of  value,  and  having  also  stat- 
ed the  expedients  in  use  for  these  purposes,  our  next  in- 
quiry relates  to  price,  or  the  current  value  of  objects  as 
rated  in  money.  It  has  been  said,  that  exchangeable  val- 
ue is  relative  in  its  nature — in  respect  to  a  particular  com- 
modity, it  is  determined  from  comparisons  instituted  be- 
tween this  commodity  and  many  others  in  the  market. 
But  in  making  these  comparisons,  we  resort  to  the  use  of 
money  as  a  measure  of  value  ;  hence  it  is  common  to  ex- 
press exchangeable  value  in  money.  We  say  that  an  arti- 
cle is  worth  so  many  dollars,  or  so  many  shillings,  according 
to  the  currency  in  use.  But  here  the  inquiry  arises  ;  In  af- 
fixing current  prices  to  objects,  what  is  to  be  our  guide  ? 
We  say  that  a  bushel  of  wheat  is  worth  $2,00 ;  a  yard  of 
broadcloth  of  certain  quality  .f  7,00  ;  a  cwt.  of  sugar  ,f  10, 
00.  What  leads  us  to  these  results  in  respect  to  the 
price  of  these  different  commodities  ?  To  obtain  an  an- 
swer to  these  inquiries,  suppose  that  we  go  into  the  mar- 
ket, and  see  what  are  the  views  which  there  prevail  upon 
this  subject.  We  ask  the  price  of  some  article, — a  hat, 
for  example.  We  are  told,  that  it  is  $7,00.  We  object 
to  this  price  perhaps,  as  too  high.  But  the  manufacturer 
assures  us,  that  a  hat  of  this  quality  cannot  be  afforded  for 


136  POLITICAL  ECONOMY. 

a  less  sum.  It  costs  that  to  make  it.  Perhaps  he  then 
goes  into  particulars.  He  tells  us  that  furs  are  high,  and 
that  the  materials  of  which  the  hat  is  composed  cost  him 
a  certain  amount.  He  then  tells  us  how  long  a  time,  or 
the  amount  of  labor,  it  takes  to  make  a  hat.  Perhaps  he 
has  something  to  say  about  shop-rent,  or  the  other  ex- 
penses of  his  establishment ;  and  then  he  adds,  "  A  man 
must  live,"  by  which  he  means,  that  a  manufacturer  of 
hats,  as  well  as  other  producers,  must  obtain  the  usual 
profits  on  his  business.  But  perhaps  the  purchaser  re- 
plies, I  bought  last  year  a  hat  of  the  same  quality  for  five 
dollars.  True,  you  did  so,  says  the  other,  but  that  was 
because  the  market  was  overstocked  with  hats.  Too 
many  were  engaged  in  this  branch  of  business,  and  it  be- 
came a  losing  concern  to  us  all.  We  could  not  sell  our 
hats  for  what  it  cost  us  to  make  them.  Hence  many  hat 
manufacturers  failed,  and  others  were  compelled  to  leave 
the  business  for  want  of  employment.  The  result  has 
been  that  the  supply  has  become  proportioned  to  the  de- 
mand, and  hats  now  bring  a  fair  price. 

Now  here,  as  I  conceive,  stated  in  the  common  lan- 
guage of  the  market,  is  the  whole  theory  of  price.  The 
basis  of  it  is  the  cost  of  production.  Its  temporary  varia- 
tions, or  rather  its  oscillations  about  the  same  point — now 
higher  and  now  lower,  are  the  relative  influences  of  sup- 
ply and  demand.  There  are  it  is  true  other  causes  of 
variation — the  value  of  the  different  items  which  make  up 
the  cost  of  production  varies,  or  the  measure  of  value  va- 
ries. In  either  case,  there  is  a  correspondent  variation 
in  price. 

But  here  it  is  necessary  to  look  more  narrowly  into  the 
subject  of  the  cost  of  production.     In  the  case  just  sup- 


PRICE.  127 

posed,  which  is  that  of  a  product  in  manufactures,  these 
items  are,  1.  The  amount  paid  for  materials — this  comes 
under  the  head  of  productive  capital.  2.  The  labor  em- 
ployed in  manufacturing  the  article.  3.  The  expenses  of 
the  establisment — buildings,  tools  &:c.  This  also  is  in- 
cluded under  the  head  of  productive  capital.  To  these 
items  we  must  add  the  profits  of  the  manufacturer,  or 
what  is  paid  him  as  the  undertaker  and  conducter  of  the 
business,  distinct  from  the  wages  of  his  labor  as  a  manu- 
facturer. Capital,  labor  and  profits,  then,  make  up  the 
cost  of  production  of  this,  as  they  do  of  most  manufactur- 
ed articles. 

Suppose  next,  that  the  commodity,  into  the  cost  of 
whose  production  we  inquire,  is  an  agricultural  product — 
a  load  of  hay.  This  is  sold  perhaps  for  $12,00  per  ton, 
and  the  prodiicer  who  brings  it  to  market,  tells  us  that  it 
cannot  be  afforded  for  a  less  sum.  What  items  make  up 
the  cost  of  production  of  this  commodity  ?  One  portion, 
as  before,  is  labor.  A  second  is  capital,  including  what 
is  expended  in  improvements  on  the  farm — in  farming 
utensils — cattle  Stc.  A  third  is  rent,  or  an  equivalent  for 
the  use  of  the  natural  agency  employed — that  is  for  xhe 
use  of  land.     A  fourth  item  is  profits,  as  before. 

Suppose  the  cost  of  production  of  a  commercial  prod- 
uct is  next  to  be  determined — a  cwt.  of  coffee,  whose  price 
is  $12,00.  The  items  which  here  make  up  the  cost  of 
production,  are,  1.  The  interest  on  the  capital  vested  in 
the  coffee  offered  for  sale — also  of  that  expended  in  the 
establishments  for  commercial  production — shipping,  ware- 
houses, both  for  the  wholesale  and  retail  trade  &c.  2, 
The  wages  of  those  employed  as  laborers  in  transpor- 


128  ,      POLITICAL  ECONOMY. 

tation,  and  in  buying  and  selling  the  commodity.  3.  The 
profits  of  business. 

It  will  be  noticed,  that  in  these  statements,  I  look  at 
the  cost  of  production  to  the  manufacturer,  to  the  agricul- 
turist, and  to  the  merchant,  severally,  without  going  into 
an  analysis  of  the  original  cost  of  the  product  in  each  in- 
stance. We  learn  from  them,  that  the  cost  of  produc- 
/  tion  is  made  up  of  the  interest  on  capital,  of  wages,  of 
/  ^  profits,  and  in  some  instances  of  rent,  for  the  use  of  natu- 
^'  ral  agency.  Whatever  then  affects  one  of  these  items, 
either  as  to  its  amount,  or  its  value,  will  cause  a  variation 
in  the  cost  of  production.  If  from  the  invention  of  a  la- 
bor-saving machine,  or  from  any  cause,  the  amount  of  la- 
bor required  in  the  manufacture  of  hats  is  diminished, 
there  will  be  a  diminution  in  the  cost  of  production.  The 
same  result  will  follow,  if  from  any  cause  the  exchangea- 
ble value  of  labor,  or  the  rate  of  wages,  becomes  less. 
So  too  of  capital ;  if  some  method  of  production  is  invent- 
ed, which  requires  a  less  amount  of  capital,  or  if  the  rate 
of  interest  paid  for  the  use  of  capital  become  less,  in  either 
case,  the  cost  of  production  is  affected.  The  same  holds 
true  of  natural  agency.  And  in  respect  to  profits,  if,  from 
any  cause,  there  is  a  variation  in  the  general  rate  of  prof- 
its, or  if  the  rate  of  profits  in  any  particular  branch  of  pro- 
duction should  be  affected  in  any  way,  there  will  be  a 
correspondent  variation  in  the  cost  of  production.  It  will 
indeed  often  happen,  that  these  influences  on  the  cost  of 
production,  thus  arising  from  different  sources,  will  coun- 
teract each  other.  Thus  the  application  of  a  larger 
amount  of  machinery  in  the  raising  of  a  commodity,  will 
diminish  the  charge  for  labor,  and  increase  that  for  capi- 


\ 


PRICE.  129 

tal.  In  other  instances,  there  may  be  a  diminution  of  the 
amount  of  capital  required,  but  this  may  be  balanced  by  a 
rise  in  the  interest  paid  for  the  use  of  capital. 

Thus,  without  taking  into  the  account  the  variations  re-= 
suiting  from  relative  supply  and  demand,  we  see  that  im- 
portant and  frequent  variations  may  arise,  in  connexion 
with  the  cost  of  production  itself.  I  do  not  here  stop  to 
state  the  causes,  which  at  different  times  affect  the  value 
of  the  different  items  in  the  cost  of  production.  These 
are  brought  to  view  in  another  place,  and  the  statement  of 
them  is  not  necessary  to  the  investigation  of  the  subject  of 
price. 

On  supply  and  demand. 

We  come  now  to  the  examination  of  what  is  justly  re- 
garded as  the  great  disturbing  cause  of  price, — the  influ- 
ence of  supply  and  demand.  And  here  an  explanation 
of  these  terms,  as  used  in  the  science,  is  required.  De- 
mand, in  its  widest  sense,  is  another  expression  for  the 
wants  of  men.  To  the  extent  of  these  wants,  there  may 
be  said  to  be  a  demand  for  that  which  will  supply  them. 
But  as  the  term  is  here  used,  another  important  cir- 
cumstance comes  into  the  account.  It  implies  both  the 
willingness  and  the  ability  to  give,  in  return  for  what  is 
thus  wanted,  an  equivalent  in  value.  In  respect  then  to 
any  commodity,  so  far  as  there  is  in  a  community  an  abil- 
ity and  a  willingness  to  give  for  it  that  which  has  ex- 
changeable value,  to  the  same  extent  there  may  be  said 
to  be  in  this  community  a  demand  for  this  commodity. 

Supply,  on  the  other  hand,  means,  not  only  that  an  ob- 
ject is  in  existence,  but  that  it  is  in  the  market — that  is. 


130  POLITICAL    ECONOBIY. 

those  possessing  it  are  willing  to  part  with  it  upon  receiv- 
ing an  equivalent,  as  determined  by  the  same   principles, 
which  determine  the  price  of  other  commodities  of  a  like', 
nature. 

And  here,  incidentally,  in  connexion  with  this  explana- 
tion of  the  terms  supply  and  demand,  we  may  see  what 
constitutes  a  market.  It  is  production  itself,  which  opens 
a  vent,  or  creates  a  demand  for  products.  He  who  is  suc- 
cessfully engaged  as  a  producer  of  that  which  has  ex- 
changeable value,  is  acquiring  the  ability  to  supply  his  own 
wants,  which,  it  has  just  been  said,  is  essential  to  consti- 
tute demand.  Hence  the  greater  the  number  of  such  pro- 
ducers in  a  community,  and  the  greater  the  variety  of  pro- 
ducts, the  greater  will  be  the  demand  for  different  products, 
or,  in  other  words,  the  belter  the  market.  And  thus  it  is, 
that  every  one  becomes  interested  in  the  prosperity  of 
those  around  him.  Hence  also  it  is  more  desirable  to 
be  the  citizen  of  a  thriving,  advancing  community,  than 
of  one  which  is  stationary,  or  whose  movement  is  retro- 
grade. 

But  to  return  to  the  subject  of  supply  and  demand  as 
affecting  price.  When  the  current  price  of  an  article  is 
the  same  as  its  cost  price,  by  which  I  mean  the  cost  of  its 
production,  it  is  an  indication,  that  the  supply  of  this  arti- 
cle corresponds  to  the  demand  for  it.  In  this  case,  then, 
supply  and  demand  exert  no  influence  upon  price.  But 
if  from  any  cause  the  demand  exceeds  the  supply,  there 
follows  at  once  a  rise  of  the  exchangeable  price  above  the 
cost  price.  It  is  so,  since  there  are  more  who  wish  to  ob- 
tain the  article  than  can  be  supplied  with  it,  and  this  pro- 
duces a  competition  among  purchasers.  On  the  contrary, 
if,  from  any  cause,  the  supply  exceeds  the  demand,  the 


PRICE.  131 

exchangeable  price  falls  below  the  cost  price.  Here  the 
competition  is  on  the  part  of  those  who  have  the  article  to 
dispose  of;  for  since  there  is  a  larger  amount  in  the  mar- 
ket tlian  can  find  purchasers,  each  seller  is  desirous  of  sus- 
taining as  little  loss  as  possible.  He  endeavors  therefore 
to  undersell  others,  and  is  willing  to  sell  at  a  rate  below 
cost.  Thus  it  is  that  the  relative  variations  of  demand 
and  supply  are  continually  affecting  the  exchangeable 
price  of  commodities,  at  one  time  raising  it  above,  and  at 
another  sinking  it  below,  the  cost  of  production. 

From  the  statements  which  have  now  been  made,  it 
may  be  inferred,  that  the  causes  which  affect  the  current 
prices  of  commodities,  may  be  traced  to  three  different 
sources  ;  1 .  To  variations  in  the  measure  of  value.  2. 
To  an  increase  or  diminution  of  the  cost  of  production. 
3.  To  the  state  of  the  market,  or  the  relative  influence  of 
supply  and  demand.  I  propose  to  consider,  separately, 
each  class  of  these  disturbing  causes  of  current  price. 

Price  as  affected  by  variations  in  money    or   the  measure 
of  value. 

We  have  seen  that  the  precious  metals,  the  materials 
of  coined  money,  are  subject  to  variations  in  their  value. 
In  this  respect,  they  differ  not  from  other  commodities. 
The  cost  of  their  production  varies,  and  they  feel,  in  its 
full  power,  the  influence  of  supply  and  demand. 

It  has  also  been  stated,  that  money  varies  in  its  ex- 
changeable value  from  alterations,  made  by  the  govern- 
ments of  different  countries,  in  the  coins  and  denomina- 
tions of  the  standard  currency.  The  gold,  or  silver,  in 
the  same  coin,  is  greater  in  amount  and  purer  in  its  qua^ 


I 


132  POLITICAL  ECONOMY. 

ity  at  one  time,  than  at  another ;  or  by  some  act  of  au- 
thority, the  relative  value  of  different  denominations  of 
coined  money  is  changed.  Now  whatever  be  the  nature 
of  the  cause  thus  affecting  the  measure  of  value,  whether 
connected  with  the  cost  of  production  of  the  materials  of 
this  measure,  or  with  authoritative  alterations  of  the  stan- 
dard currency,  no  sooner  is  this  variation  in  the  measure 
of  value  known  to  exist,  than  its  disturbing  influence  on 
the  current  prices  of  all  objects  in  the  market,  will  be  felt. 
If  there  are  more  dollars  in  the  country  than  are  needed 
as  a  circulating  medium,  or  if  the  amount  of  silver  in  a 
dollar  is  less,  or  the  proportion  of  alloy  greater,  in  each 
case,  the  exchangeable  value  of  a  dollar  becomes  less. 
And  since  money  is  used  as  a  measure  of  value,  the  cur- 
rent price  of  all  commodities  in  the  market,  will  be  affec- 
ted by  this  variation  in  the  value  of  money.  The  article 
of  furniture,  which  before  was  estimated  at  $20,  is  now 
valued  at  $22  ;  and  so  of  other  commodities. 

In  modern  times,  since  the  monetary  systems  of  differ- 
ent countries  have  become  well  established,  the  influence 
of  this  disturbing  cause  on  current  price  is  slight,  and 
gradual  in  its  operation.  Hence  the  business  classes  of 
the  community  suffer  but  little  inconvenience  from  this 
source.  The  same  man  is  both  buyer  and  seller,  and  usu- 
ally about  to  the  same  amount ;  so  that  he  gains  as  much 
on  one  score,  as  he  loses  on  another.  When  however  it 
produces  a  depreciation  in  the  value  of  the  currency,  the 
effect  will  at  once  be  felt  by  those,  whose  income  is  a  fix- 
ed or  a  stipulated  amount.  They  will  find,  that  though 
their  revenue  be  nominally  the  same,  its  value  is  dimin- 
ished. This  will  be  the  case  with  all  those,  whose  in^ 
come  is  derived  from  rents,  or  from  money  at  interest. 


PBICE.  133 

The  same  is  true  of  those  whose  support  is  received  in 
the  form  of  salary.  Thus  it  has  often  happened  in  this 
country,  that  the  salary  of  an  office,  which  a  half-century 
ago  was  considered  a  good  living,  has  ceased  to  furnish  a 
support  to  the  incumbent ;  and  the  depreciation  in  the 
exchangeable  value  of  money,  is  a  principal  cause  of  this 
difference.  So  too,  and  from  the  same  cause,  it  is  found, 
that  the  revenues  of  some  ancient  eleemosynary  institu- 
tions, which  are  paid  in  money,  have  depreciated  in  val- 
ue, while  those  paid  in  wheat,  or  other  agricultural  prod- 
ucts, have  from  the  same  and  other  causes  become  far 
more  valuable. 

And  here  may  be  mentioned  another  disturbing  cause 
of  price,  the  effects  of  which  are  often  great  loss  and  in- 
convenience to  all  classes  of  the  community.  I  refer  to 
the  partial  and  sometimes  total  depreciation  in  the  value 
of  bank  notes — the  representatives  of  coined  money.  Bank- 
ing institutions  often  have  a  large  amount  of  their  notes, 
or,  as  they  are  usually  called,  bills,  in  circulation,  in  the 
hands  of  many  different  individuals,  when,  from  some 
cause,  they  become  unable  to  redeem  their  bills,  and  thus 
those  holding  them  suffer  a  partial  or  total  loss.  For  the 
notes  of  a  broken  bank,  if  current  at  all,  are  circulated  at 
a  large  discount,  perhaps  for  half  or  one  third,  of  their 
nominal  value.  But  the  evils  which  result  from  occurren- 
ces of  this  kind,  are  not  confined  to  the  actual  losses  of 
the  holders  of  notes,  or  the  embarrassments  of  business 
transactions  from  a  depreciation  of  a  part  of  the  currency. 
A  shock  is  given  to  confidence  in  the  representative  part 
of  the  circulating  medium  generally,  which  is  often  at- 
tended with  much  inconvenience  and  loss.  Hence  the 
breaking  of  one  bank  often  leads  to  the  insolvency  of  others. 
12 


134  POLITICAL    ECONOMY. 

The  inference  to  be  made  from  this  statement  is,  that  the 
government  of  a  country,  as  the  guardian  of  the  public 
welfare,  ought  to  exercise  much  caution  and  wisdom  in 
the  establishment  of  banking  institutions,  and  to  watch 
narrowly  over  the  manner  in  which  their  concerns  are 
conducted. 

In  connexion  with  the  subject  of  variations  in  the 
measure  of  value,  the  inquiry  may  arise,  In  what  way 
may  the  reader  of  history  be  enabled  to  form  a  correct  es- 
timate of  the  value  of  objects,  whose  price  is  stated  in  an- 
cient histories  ?  This  cannot  be  done  with  perfect  accu- 
racy, but  an  approximation  to  this  result  may  be  made  in 
the  following  manner.     ^ 

Suppose  we  read  that  some  commodity  was  worth  in 
Athens,  at  the  time  of  Pericles,  a  certain  number  of  tal- 
ents of  silver,  and  we  wish  to  know  the  value  of  this  com- 
modity in  our  own  currency.  We  first  ascertain  what 
was  the  amount  of  pure  silver  at  Athens  in  the  talent,  at 
that  time.  For  this  information,  we  must  rely  upon  his- 
torical statements.  We  then,  from  the  same  source,  find 
out  the  value  of  silver  in  some  staple  commodities  of  that 
time,  particularly  in  the  commodities  used  as  bread  stuff. 
Having  thus  ascertained  how  much  wbeat,  or  other  staple 
commodities,  an  ounce,  or  any  amount  of  silver  was  ex- 
changed for  at  that  time,  we  in  the  same  manner  institute 
a  comparison  between  the  same  amount  of  silver  and  the 
same,  or  like  commodities,  in  our  own  times.  We  thus 
obtain  what  is  needed  for  determining  the  value  of  silver 
in  the  two  periods  compared,  It  only  remains  for  us,  to 
express  this  amount  of  silver  in  our  own  currency.  It 
will  be  noticed,  that  the  larger  the  number  of  articles,  of 
which  a  comparison  between  their  value  and  that  of  sil^ 


PRICE.  136 

ver  is  instituted,  the  more  accurate  will  be  the  conclusion 
which  is  drawn. 

Price  as  affected  hy  the  fluctuations  of  the  market. 

So  great  is  the  influence  of  supply  and  demand  upon 
the  price  of  commodities,  that  it  may  be  likened  to  the 
pendulum  of  the  clock.  It  is  the  regulator — that  which 
secures  the  steady  movement  of  the  whole  machine.  I 
design  in  this  section,  to  bring  forward  some  instances,  in 
which  its  power  is  felt,  and  thus  to  shew  both  the  causes 
and  the  consequences  of  variations  of  price,  so  far  as  they 
arise  from  this  source. 

It  sometimes  happens,  that  the  crops  of  wheat  are  less 
than  in  other  years,  by  one  third,  or  one  half,  of  their  usu- 
al amount.  And  though  it  may  not  be  an  unfavorable 
season  in  every  part  of  the  world,  the  transportation  of  so 
bulky  a  commodity  from  one  country  to  another,  is  at- 
tended with  so  much  labor  and  expense,  that  little  relief 
can  be  expected  from  this  source.  Such  a  deficiency  oc- 
curred in  this  country  in  1816.  Now  it  is  usually  the 
case,  that  the  amount  of  wheat  raised  in  a  country,  as  of 
all  annual  products,  is  nearly  proportioned  to  the  usual 
demand.  When,  therefore,  there  is  a  deficiency  in  the 
crop  to  the  extent  stated,  the  supply  in  the  market  must 
fall  far  short  of  the  demand.  The  cause  is  obvious ; — 
that  natural  agent,  which  assists  man  in  the  production  of 
wheat,  has  been  less  efficient  than  usual.  What  then  are 
the  consequences,  when,  in  respect  to  so  important  a  com- 
modity, the  supply  falls  far  short  of  the  demand  ? 

And  first,  how  are  the  interests  of  the  producers  affect- 
ed ?     The  farmer,  who  has  usually  raised  five  hundred 


186  POLITICAL  ECONOMY. 

bushels  of  wheat,  this  year,  from  the  same  land,  and  the 
same  outlay  of  capital  and  labor,  has  obtained  but  half 
that  amount.  But  in  former  years,  the  price  of  wheat 
was  $1,00  per  bushel ;  it  is  now  $2,00.  He  may  now, 
then,  should  he  sell  the  whole  crop,  receive  as  much 
money  in  exchange  for  it,  as  in  former  years ;  and  even 
save  something,  since  the  expense  of  harvesting  and  of 
transportation  to  the  market  may  be  less.  But  the  farmer 
is  himself  a  consumer  of  wheat,  and  it  is  only  the  surplus 
part  of  his  crop  that  he  sells.  And  though  in  a  year  of 
scarcity  lie  may  consume  much  less  wheat  in  his  family^ 
his  profits  from  his  wheat  crop,  will  probably  fall  far  short 
of  what  he  is  accustomed  to  obtain.  Even  then,  if  we 
suppose  that,  counting  what  is  consumed  in  his  family  at 
the  rate  of  $2,00  per  bushel,  he  receives  a  sufficient 
amount  to  meet  the  expenses  of  production, — that  is,  if 
the  exchangeable  price  of  the  whole  crop  equals  the  cost 
price,  still  he  makes  no  larger  profits  than  usual,  and  as  a 
consumer  of  wheat,  he  suffers  loss,  in  the  same  manner  as 
other  members  of  the  community.  Thus  it  appears,  that 
the  usual  impression,  that  the  gains  of  the  farmer  are 
greater  in  years  of  scarcity,  is  incorrect.  He  may  obtain 
a  higher  price  for  his  wheat,  but  he  has  less  to  sell,  and 
in  common  with  others,  he  may  be  considered  as  paying 
a  higher  price  for  what  he  consumes  in  his  own  family. 

We  look  next  at  the  consequences  which  result  to  the 
community.  It  is  evident,  that  as  there  is  less  wheat  to 
be  consumed  by  one  half,  than  in  common  years,  economy 
must  be  practised  by  consumers  generally.  A  part  of  the 
crop  in  years  of  plenty,  may  have  been  used  perhaps  in 
making  whiskey,  or  for  some  other  purposes,  than  bread 
stuff  for  man.     It  must  no  longer  be  used  for  these  pur- 


PRICE.  137 

poses.  Some  portion  also  may  have  been  sent  abroad  in 
exchange  for  foreign  commodities.  This  portion  must 
now  be  kept  for  home  consumption.  And  further,  more 
wheat  may  have  been  consumed  in  families  generally, 
through  the  country,  than  is  necessary.  Domestic  re- 
trenchment must  then  be  put  in  practice — less  wheat 
must  be  used,  and  some  other  agricultural  products,  as 
potatoes,  or  garden  vegetables,  must  be  substituted  in  its 
"  place.  Should  the  government  of  a  country  undertake, 
in  a  year  of  scarcity,  to  pass  laws,  regulating  the  consump- 
tion of  wheat,  so  that  the  deficient  crop  might  hold  out 
till  ar.other  harvest  comes  round,  it  would  probably  enact, 
that  in  these  several  ways,  the  consumption  of  wheat 
should  be  lessened.  But  the  same  result  is  effected,  and 
without  any  act  of  authority,  by  the  rise  of  price,  conse- 
quent on  the  diminished  supply.  As  wheat  has  become 
dearer,  those  possessing  it  find  it  for  their  interest  to  use 
it  only  for  bread-stuff;  they  will  for  the  same  reason  keep 
it  at  home,  rather  than  send  it  abroad.  And  each  family 
wilKuse  it  with  as  little  waste  as  possible,  substituting  for 
it,  so  far  as  is  practicable,  some  other  and  cheaper  com- 
modity. 

And  here  we  may  incidentally  notice  the  importance  of 
having  the  style  of  living  of  the  mass  of  the  community 
sufficiently  high  to  allow  of  its  being  reduced.  In  Ire- 
land, where  the  prevailing  food  is  potatoes,  if  a  failure 
of  the  potatoe  crop  occurs,  there  is  no  cheaper  commodi- 
ty, which  can  be  substituted  in  its  place,  and  great  suffer- 
ing and  tumioil  are  the  consequences  which  ensue.  But 
where,  as  in  England,  wheat,  and,  in  this  country,  meats, 
are  in  general  use,  there  is  an  important  resource  to  the 
nation  against  seasons  of  scarcity. 
12* 


138 


POLITICAL  ECONOMY. 


Thus  it  is,  that  in  a  year  of  scarcity,  the  deficient  crop 
is  husbanded  by  means  of  the  increased  price,  with  the 
least  possible  inconvenience  and  loss,  both  to  producers 
and  consumers.  And  now,  if  we  continue  our  view,  we 
find,  that  when  the  season  for  a  new  crop  has  come  round, 
the  advanced  price  of  wheat  will  lead  more  to  engage  in 
its  production, — more  land  will  be  cultivated,  and  the  out- 
lay of  labor  and  capital  in  this  branch  of  production  will 
be  larger.  And  perhaps,  as  it  often  happens,  the  next 
season  is  one  of  unusual  plenty-^the  supply  exceeds  that 
of  common  years,  as  much  as  it  had  fallen  short  of  it  the 
year  before.  Now,  then,  the  supply  exceeds  the  demand, 
and  if  we  look  at  the  consequences,  both  to  producers  and 
consumers,  we  find,  that  they  are  the  reverse  of  those  be- 
fore staled.  The  price  immediately  falls,  even  below 
what  is  wont  to  be  obtained  in  common  years  ;  but  as  the 
surplus  of  the  farmer  is  larger  than  usual,  in  proportion  to 
his  outlay  of  capital  and  labor,  he  obtains  his  average  prof- 
its on  the  whole  crop.  It  is  not  then  as  a  producer,  but 
as  a  consumer  of  wheat,  that  the  farmer  himself  is  bene- 
fitted by  a  year  of  plenty,  in  common  with  other  members 
of  the  community.  And  it  is  here  to  be  noticed,  that  in 
respect  to  a  product  of  prime  necessity,  as  wheat,  just  in 
proportion  as  the  price  is  diminished,  the  demand  will  in- 
crease. In  common  years,  many  families  might  consume 
more  wheat,  than  they  do,  could  they  afford  to  purchase 
it.  And  the  diminution  of  the  price,  consequent  upon 
the  excess  of  supply,  puts  it  within  the  power  of  such 
families,  to  enlarge  their  consumption.  Hence,  through 
the  whole  community,  the  increase  of  demand  from  this 
source,  will  be  considerable.  Further,  as  the  price  of 
wheat  is  reduced,  it  is  used  for  other  purposes  than  bread- 


PRICE.  139 

stuff,  and  exporters  will  perhaps  find  it  for  their  advantage 
to  purchase  it  and  send  it  to  foreign  markets. 

Thus,  in  respect  to  agricultural  products  of  prime  ne- 
cessity, and  of  general  consumption,  the  variations  of 
price,  consequent  upon  the  fluctuations  of  the  market, 
tend  to  prevent  the  inconveniences  and  losses,  vvhicTi 
would  otherwise  be  felt  both  by  consumers  and  producers. 
When  the  supply  falls  short  of  the  demand,  the  high  price 
which  results,  enables  the  producer  to  obtain  from  a  less 
amount  of  wheat,  which  he  has  to  dispose  of,  what  repays 
him  for  the  cost  of  production  ;  and  at  the  same  time  hus- 
bands the  crop,  so  that  less  inconvenience  is  felt  from  the 
scarcity  by  consumers  generally.  On  the  other  hand, 
when  the  supply  exceeds  the  demand,  the  reduction  of 
price  brings  the  commodity  within  the  ability  of  greater 
numbers  to  purchase  it,  and  enables  those  before  using  it, 
to  use  it  in  larger  quantities.  Thus  again  the  community 
is  benefitted,  and  the  exchangeable  price  is  kept  from 
falling  below  the  cost  of  production. 

I  will  now  state  a  different  case.  England,  before  the 
late  war  with  this  country,  was  accustomed  to  supply  our 
markets  with  various  manufactured  products ;  and  to  fur- 
nish this  supply,  many  laborers  and  a  large  amount  of 
capital  were  employed.  When  the  war  broke  out,  this 
vent  for  her  manufactures  ceased.  And  as  her  home  con- 
sumption, and  that  of  other  foreign  markets,  could  not 
furnish  a  demand,  in  proportion  to  the  supply  of  these 
commodities,  there  was  a  glut  of  them,  which  was  attend- 
ed with  a  great  reduction  of  their  price. 

This  case  differs  from  that  which  has  been  stated,  both 
as  to  its  cause  and  the  nature  of  the  commodities  concern- 
ed.    In  the  former  case,  the  excess  of  supply  arose  from 


140  POLITICAL    ECONOMY. 

the  uncommon  fruitfulness  of  the  season,  added  to  an  over 
effort  in  production,  which  had  been  caused  by  the  scarci- 
ty of  the  preceding  year.  In  this  case  it  resuhed  from 
the  loss  of  a  foreign  market  by  war.  The  product  too, 
in  the  former  case,  was  one  of  prime  necessity,  the  de- 
mand for  which  always  keeps  pace,  in  some  good  degree, 
with  the  increased  supply  and  consequent  diminution  of 
price.  In  the  latter,  the  products,  though  in  general  use, 
are  of  a  class,  not  absolutely  essential  to  human  subsist- 
ence, and  though  their  consumption  may  be  enlarged  by 
a  reduction  of  their  price,  still  this  enlargement  of  demand 
is  limited,  and  by  no  means  in  proportion  to  the  excess  of 
supply. 

To  those  then  engaged  as  producers  of  manufactured 
products,  a  glut  of  the  market,  such  as  that  referred  to, 
must  be  attended  with  great  loss  and  embarrassment.  No 
enlargement  of  demand  comes  in,  of  sufficient  extent  to 
take  off  their  excess  of  products,  even  at  reduced  prices. 
Neither,  as  in  the  case  of  agricultural  products,  is  a  larger 
amount  received  from  the  same  outlay,  so  that,  though 
the  price  for  any  definite  quantity  falls,  the  increased 
amount  of  products  sold,  makes  up  the  deficiency  of  prof- 
its. And  besides  the  loss  on  products  sold  for  less  than 
the  cost  of  production,  the  investments  of  capital  in  build- 
ings and  machinery,  must  either  be  permitted  to  remain 
inactive,  or  be  sold  at  an  immense  sacrifice. 

But  let  us  now  see  in  what  manner  the  interests  of  the 
community  in  this  case  are  affected.  From  the  reduction 
in  the  price  of  manufactures,  those  who  wish  to  obtain  a 
supply  of  articles  of  this  kind,  can  purchase  them  at  a 
much  lower  rate,  than  usual — a  rate  below  the  cost  of 
their  production.     But  few  families  can  afford  to  expend 


PRICE.  141 

a  larger  proportion  of  their  income  in  the  purchase  of  man- 
ufactures, than  they  are  accustomed  to  devote  to  this  pur- 
pose. They  will  then  generally  rest  satisfied  with  obtain- 
ing from  the  same  expenditure,  a  larger  supply.  Besides, 
the  home  consumers  of  these  commodities,  are  themselves 
producers,  and  they  soon  find  their  own  prosperity  affect- 
ed by  the  depression  of  other  productive  classes  around 
them.  Their  own  revenues  fall  short  of  the  usual  amount, 
and  they  find,  that  they  have  less  to  expend  in  the  pur- 
chase of  manufactures,  than  in  seasons  of  more  general 
prosperity.  And  then,  too,  if  remote  consequences  are 
taken  into  the  account,  it  is  found,  that  the  reduction  of 
prices,  which  results  from  an  excess  of  supply,  is  followed 
by  an  advance,  to  the  same,  or  a  greater  amount.  For 
no  sooner  do  those  engaged  in  this  business  find  that  it  is 
a  losing  concern,  than  they  cease  to  manufacture,  and  en- 
deavor, so  far  as  they  can,  to  withdraw  their  capital  from 
this  mode  of  investment,  and  to  direct  it  to  some  other 
branch  of  production.  At  least,  they  will  permit  it  to  re- 
main unemployed,  until  better  times  open  to  them  the 
prospect  of  receiving  their  usual  profits.  In  the  mean 
time,  the  products  in  the  market  are  consumed,  and  a  de- 
mand arises,  to  meet  which,  no  adequate  supply  exists. 
Perhaps,  too,  the  war  is  at  an  end,  and  the  old  markets, 
and,  it  may  be,  new  ones  are  opened.  Now  then,  the 
demand  greatly  exceeds  the  supply,  and  those  who  would 
obtain  these  products,  must  pay  a  price,  as  much  beyond 
the  cost  of  production,  as  before  it  had  fallen  short  of  it. 
Thus  too,  for  a  while,  producers  make  large  profits,  and 
on  the  principles  stated  in  the  chapter  on  capital,  a  larger 
amount  of  productive  capital  is  directed  to  this  branch  of 
production. 


142  POLITICAL    ECONOMY. 

There  are  numerous  other  causes,  in  addition  to  those 
now  mentioned,  which  produce  fluctuations  in  the  market 
and  other  attendant  consequences.  Such  fluctuations  are 
indeed,  to  some  degree,  continually  occurring  in  most 
branches  of  production  ;  and  it  conduces  much  to  the 
prosperity  of  a  nation,  that  they  should  be  slight.  In  pro- 
portion to  their  importance,  their  disturbing  influence  is 
felt  by  all  classes  of  the  community,  and  though  for  a 
time  some  few  may  be  benefitted,  the  general  results  are 
embarrassment  and  loss. 


Price  as  affected  by  variations  in  the  cost  of  production. 

The  falling  of  prices  from  a  diminished  cost  of  produc- 
tion, is  the  only  variation,  which  can  occur  with  profit 
both  to  producers  and  consumers.  It  is  also  permanent. 
When  the  cost  of  production  of  any  commodity  in  general 
use  is  reduced,  and  its  price  in  the  market  falls,  every 
member  of  the  community,  ever  afterwards,  finds  it  neces- 
sary to  appropriate  a  smaller  portion  of  his  revenue  to  the 
obtaining  of  that  commodity,  or,  if  he  continue  to  appro- 
priate the  same  sum,  he  receives  in  return  a  larger  amount 
of  the  same  commodity  and  perhaps  of  improved  quality. 
Others  too,  who  have  been  unable  to  obtain  this  commod- 
ity, because  of  its  high  price,  can  now  afford  to  purchase 
it ;  and  thus  the  comforts  and  conveniences  of  life  are  ex- 
tended to  a  larger  number  of  individuals.  Among  many 
instances  of  this  kind,  which  have  occurred  within  the  last 
century,  the  invention  of  the  stocking  loom  may  be  refer- 
red to,  as  affording  a  striking  illustration.  Since  the  in- 
vention and  general  use  of  this  machine,  the  price  of  a 
pair  of  stockings  has  fallen  to  one  third  of  its  for  me 


PRICE.  14$ 

amount.  He  then,  who  was  accustomed  to  spend  ten  or 
twelve  dollars  annually  for  this  article,  supplies  himself 
for  one  third  of  this  sum,  and  many,  who  at  the  former 
price  could  not  afford  to  wear  stockings,  can  now  furnish 
themselves  with  this  article  of  comfort. 

It  is  unnecessary  here  to  trace  out  the  effects  of  varia- 
tions in  price,  resulting  from  this  source.  This  has  al- 
ready been  done  in  the  chapter  on  machinery.  I  will 
here  only  add,  that  the  consequences,  there  ascribed  to 
the  introduction  of  labor-saving  machines,  are  applicable, 
so  far  as  price  is  concerned,  to  a  diminution  in  either  of 
the  items,  which  make  up  the  cost  of  production,  from 
whatever  source  it  may  arise. 

In  applying  the  principles  that  have  been  brought  to 
view  in  this  chapter,  to  different  classes  of  commodities, 
it  will  be  found,  that  these  classes  will  essentially  differ  in 
the  extent  to  which  they  are  subject  to  variations  of  price. 
Agricultural  products  which  are  in  general  use  and  of 
prime  necessity,  such  as  the  common  articles  of  food, 
though  their  price  may  vary  from  year  to  year  as  affected 
by  the  fertility  of  the  season,  will  be  found  less  subject  to 
permanent  alterations  of  price  than  other  commodities. 
The  reason  is  obvious  ; — there  is  always  a  tendency  to 
equalization  between  the  supply  and  demand  of  this  class 
of  products,  that  is,  between  population  and  the  means  of 
subsistence.  It  is  also  the  case,  that  labor-saving  inven- 
tions, and  other  improvements,  which  affect  the  cost  of 
production,  are  less  frequently  made  in  agriculture  than  in 
other  branches  of  production.  Hence  it  is,  that  in  our  at- 
tempts to  ascertain  the  value  of  the  precious  metals  at 
former  periods  of  the  world,  we  refer  to  wheat  as  a  com- 


144  POLITICAL    ECONOMY. 

modity,  whose  price  has  been  more  uniform  than  that  o( 
any  other.  Manufactured  products  in  general  use,  next 
to  agricultural  products,  will  be  less  subject  to  variations 
of  price.  I  refer  here  to  the  common  articles  of  clothing 
and  of  furniture  in  our  domestic  establishments.  Such 
commodities,  though  their  price  may  be  affected  by  chang- 
es in  the  cost  of  their  production,  are  less  subject  to  fluc- 
tuations of  the  market,  the  demand  generally  equalling  the 
supply.  The  class  of  commodities,  which  more  than  all 
others  feels  the  effect  of  the  different  causes  which  lead 
to  variations  of  price,  consists  of  those  manufactured  pro- 
ducts which  are  articles  of  luxury.  It  is  here  especially, 
that  the  influences  of  fashion  are  felt,  as  they  affect  sup- 
ply and  demand,  thus  leading  to  variations  of  price. 
Hence  it  is,  that  the  profits  made  on  the  more  common 
products  of  manufactures  in  domestic  use,  are  more  sure, 
and  in  the  end  usually  much  greater,  than  what  are  re- 
ceived on  the  more  expensive  articles  of  luxury. 

Another  remark,  which  is  also  here  suggested,  relates 
to  the  importance  of  uniformity  of  price.  Variations  in 
the  prices  of  the  common  articles  of  consumption,  are  ever 
sources  of  inconvenience  and  not  unfrequently  of  positive 
injury  to  the  public,  especially  to  the  less  wealthy  por- 
tions of  the  community.  If  the  prices  of  such  commodi- 
ties fall  below  the  average  rate,  the  poorer  classes  are  thus 
enabled  to  enlarge  their  consumption,  and  raise  their  style 
of  living,  but  in  a  short  time,  perhaps,  the  cause  which 
had  led  to  a  reduction  of  prices,  ceases  to  operate, — the 
former  prices  are  restored,  or  perhaps  there  is  an  advance 
upon  them.  It  then  becomes  necessary  that  the  style  of 
living  should  also  be  reduced,  which  is  usually  attended 
with  mortification  and  painful  privations.     And  this  mor- 


PRICE.  145 

tification  and  want  of  customary  enjoyments  must  also  be 
endured  to  some  extent,  where  depression  of  price  occurs 
without  any  previous  elevation.  Other  classes  of  the  com- 
munity, also,  when  variations  of  price  are  often  occurring, 
become  less  enterprising,  and  less  ready  to  engage  in  the 
processes  of  production  ;  since  they  know  not,  but  some 
unexpected  change  of  price  may  defeat  all  their  plans  and 
calculations.  It  will  be  noticed,  that  I  here  refer  to  those 
variations  of  price,  which  arise  either  from  alterations  in 
the  medium  of  circulation,  or  from  the  fluctuations  of  the 
market  as  connected  with  supply  and  demand.  Those 
variations  which  result  from  a  diminished  cost  of  produc- 
tion, are  permanent,  and  as  they  are  gradually  introduced, 
no  injurious  consequences  result. 

The  different  economical  arrangements,  and  the  several 
agents,  concerned  in  the  production  of  wealth,  have  now 
been  brought  to  view,  and  the  principles  stated,  by  which 
its  circulation  is  regulated.  It  now  remains,  to  look  at 
these  arrangements  and  agents  as  they  exist  together,  and 
are  brought  into  joint  and  combined  action  in  the  different 
departments  of  Kuman  industry.  Opportunity  will  thus 
be  presented,  to  state  the  circumstances  favorable  to  the 
introduction  and  advancement  of  the  different  branches  of 
production,  and  to  shew  the  influence  of  measures,  adopt- 
ed by  the  governments  of  different  countries,  and  of  other 
adventitious  causes,  on  the  economical  interests  of  commu* 
nities. 

13 


I 


146  POLITICAL  ECONOMY. 

CHAPTER  VIII. 

Agriculture. 

Of  the  three  great  branches  of  industry,  Agricuhure  is 
that,  to  which,  in  the  progress  of  nations,  their  productive 
powers  are  first  directed.  It  is  so,  since  it  meets  the  most 
urgent  of  human  wants — it  furnishes  the  daily  food  of  man. 
The  common  labors  of  agriculture  are  also  simple  in  their 
nature,  requiring  no  lengthened  apprenticeship  to  become 
familiar  with  their  performance.  Neither,  in  its  early 
state,  is  a  large  amount  of  capital  needed  to  conduct  suc- 
cessfully its  simple  processes.  And  further,  it  is  in  its  na- 
ture antecedent  to  Manufactures  and  Commerce,  since  it 
furnishes  the  materials  and  objects,  on  which  these  branch- 
es of  industry  are  employed. 

But  agriculture,  even  in  its  early  and  most  simple  state, 
cannot  exist  to  any  extent  without  the  aid  of  manufac- 
tures. It  must  look  to  this  source  for  its  ploughs  and 
carts  and  the  various  implements  of  husbandry.  So  abun- 
dant also  are  the  returns  of  agricultural  industry,  that  it 
soon  leads  to  commerce  in  its  more  common  forms.  The 
agricultural  producer  soon  finds,  that  he  has  a  large  sur- 
plus, which  it  is  for  his  advantage  to  exchange  for  other 
products.  He  finds  also,  that  he  has  wants  which  his 
farm  cannot  supply. 

As  nations  become  more  populous,  and  make  progress 
in  wealth,  and  otlier  branches  of  industry  are  introduced, 
the  demand  for  agricultural  products  increases,  and  conse- 
quently more  labor  and  a  larger  amount  of  capital,  are  di- 
rected to  this  branch  of  human  industry.     The  farmer 


AGRICULTURE.  147 

finds  it  necessary  to  enlarge  his  establishment.  He  must 
be  able  to  avail  himself  of  the  improvements  made  in  hus- 
bandry ; — division  of  labor  to  some  extent  must  be  intro- 
duced, and  his  whole  business  conducted  on  a  larger  and 
more  extensive  scale.  It  is  not  necessary,  however,  to 
trace  the  progress  of  agriculture,  or  to  state  its  different 
divisions.  The  statements  and  inquiries  here  made  are 
simply  designed  to  bring  to  view  those  circumstances, 
which  are  favorable  to  its  advancement  and  prosperity. 

How  may  agriculture  he  improved  and  advanced  ? 

Most  of  our  farmers  cultivate  their  farms  as  their  fa- 
thers have  done  before  them.  The  same  crops  are  rais- 
ed— the  same  tools  used  and  the  same  methods  of  cultiva- 
tion are  practised,  year  after  year.  Compared  with  other 
branches  of  industry,  few  innovations  are  made,  and  little 
enterprise  is  manifested.  Still,  if  we  compare  the  state  of 
agriculture  a  half-century  ago  and  at  the  present  lime,  we 
find,  that  in  most  countries  some  progress  has  been  wit- 
nessed. Though  the  common  farmer  has  been  content 
to  go  on  in  the  old  way,  others  have  been  studying  and 
contriving  and  trying  experiments  and  making  improve- 
ments of  which  he  has  availed  himself. 

To  this  work  of  improvement,  the  different  sciences, 
especially  the  science  of  chemistry,  have  contributed. 
Men  of  wealth  have  also  amused  themselves,  and  done 
good  service  to  the  country,  in  the  experiments,  which 
they  have  made  on  what  may  be  called  model  forms. 
And  further,  agricultural  societies,  and  in  some  instances 
the  governments  of  different  countries,  have  adopted  meas- 


148  POLITICAL    ECONOMY. 

ures,  leading  to  the  same  results.     The  improvements, 
thus  introduced,  may  be  classified  as  follows  ; 

1.  New  modes  of  cultivation  are  discovered,  resulting 
from  a  better  knowledge  of  the  properties  of  different  soils, 
and  of  their  adaptation  to  the  raising  of  different  fruits  and 
grains  and  other  agricultural  products. 

2.  Improvements  are  made  in  the  breeds  of  domestic 
animals  used  upon  a  farm — horses,  oxen,  sheep,  he, 

3.  New  tools  and  implements  of  husbandry, — or  those 
of  an  improved  form,  are  introduced.  In  some  depart- 
ments of  agricultural  industry,  labor-saving  machines  are 
invented. 

It  is  unnecessary  to  enlarge  on  these  different  heads. 
Something  has  already  been  said  on  the  first,  when  treat- 
ing on  the  developement  of  natural  aids  to  production. 
Of  the  second,  the  introduction  of  the  merino  breed  of 
sheep  into  this  country  is  an  example.  Of  the  third,  the 
patent  office  at  Washington  shews  many  striking  instan- 
ces. More  probably  has  been  done  in  this  way  for  the 
improvement  of  agriculture,  in  the  United  States,  than  in 
all  other  countries. 

Another  class  of  improvements,  in  which  the  farmer  is 
much  interested,  relates  to  facilities  for  transportation. 
Such  are  railways,  canals  and  well  made  common  roads. 
Agricultural  products  are  bulky.  Much  of  their  vnlue 
therefore,  must  depend  on  their  proximity  to  a  market. 
A  bushel  of  corn,  which  in  the  cities  on  our  sea-board  is 
sold  readily  for  one  dollar,  in  the  remote  interior  of  the 
country,  will  command  only  one  half  or  even  one  fourth 
of  that  sum.  Now  should  a  railway  or  canal  be  opened 
to  this  remote  interior,  so  as  to  connect  it  with  a  market, 


AGRICULTURE.  149 

the  price  of  corn  is  immediately  affected  ; — it  is  doubled, 
or  perhaps  tripled  ;  and  so  of  other  agricultural  products. 

The  inquiry  is  sometimes  made,  whether  it  be  more  ad- 
vantageous to  a  nation,  that  its  territory  should  be  divi- 
ded into  small  farms,  of  five  or  ten  acres,  in  possession  of 
numerous  proprietors,  or  into  larger  tracts  of  two  or  three 
hundred  acres  ?  In  this  connexion,  we  are  led  to  answer 
this  inquiry  in  favor  of  large  farms.  Every  farmer  must  be 
provided  to  some  extent,  with  an  apparatus  for  his  business. 
He  must  have  his  tools,  wagons,  working  cattle,  barns, 
granaries,  he.  Now,  if  a  territory  be  divided  into  small 
farms,  either  the  amount  of  capital  vested  in  this  manner, 
will  be  much  greater  than  is  required  where  farms  are  lar- 
ger, or  agricultural  business  will  not  be  well  conducted 
for  the  want  of  this  capital.  Besides,  the  progress  of  sci- 
ence is  pointing  out  new  methods  of  cultivation,  and  the 
inventions  of  art  are  offering  new  implements  of  husband- 
ry to  the  farmer.  Of  these,  he,  who  has  a  large  capital 
and  a  farm  of  some  extent,  can  afford  to  avail  himself, 
and  it  is  important  to  the  interests  of  agriculture  in  the 
country,  that  this  should  be  done. 

The  government  of  a  country  may  cherish  and  encour- 
age agricultural  industry  in  various  ways. 

It  may  aid  and  excite  scientific  men,  to  make  those 
discoveries,  which  lead  to  improvements  in  agricultural  in- 
dustry. Discoveries  of  this  kind/are  sometimes  made  at 
great  expense,  and  it  seems  reasonable,  that  as  the  public 
generally  are  to  derive  benefit  from  them,  this  expense 
should  be  paid  from  the  public  purse. 

It  may  grant  patent  rights  to  those  who  make  inven- 
tions in  agricultural  tools  and  implements. 

It  may  either  directly,  or  through  the  medium  of  agri- 
13* 


150  POLITICAL  ECONOMY. 

cultural  societies,  offer  bounties,  or  rewards,  to  those  farm- 
ers who  excel  in  the  management  of  their  farms,  and  in 
raising  superior  products  from  the  soil. 

It  may  assist  in  diffusing  information  on  subjects,  which 
relate  to  improvements  in  agriculture,  whether  the  result 
of  scientific  investigations  and  reasonings,  or  of  practical 
farming. 

By  a  system  of  internal  improvements,  it  may  do  much 
to  facilitate  the  transportation  of  agricultural  products,  and 
thus  open  new  markets  to  the  farmer. 

At  present,  much  is  done  in  our  own  country  for  the 
last  mentioned  object,  by  joint  stock  companies,  who  re- 
ceive an  act  of  incorporation,  and  look  to  collections  in 
the  form  of  tolls,  for  a  remuneration  of  what  is  advanced 
by  them.  But  such  tolls  are  a  tax,  which  is  burdensome 
to  the  agricultural  part  of  the  community  ;  and  hence, 
whatever  aid  the  government  may  afford  in  lessening  or 
preventing  this  tax,  is  an  encouragement  to  agriculture. 

Opinions  of  the  French  Economists  considered. 

It  has  been  stated,  that  agriculture  is  a  branch  of  indus- 
try, peculiarly  adapted  to  the  early  stages  of  national  ex- 
istence, and  that  it  is  the  employment,  in  whicii  most  na- 
tions at  that  period  in  their  history  are  found  engaged.  The 
inquiry  may  arise, — How  far  it  is  expedient  that  commu- 
nities advanced  in  wealth  and  engaged  in  other  depart- 
ments of  industry,  should  still  continue  their  agricultural 
pursuits  ?  In  other  words,  it  may  be  asked,  whether  it 
should  be  left  to  capital  and  industry,  to  follow  the  rate  of 
profits,  and  to  be  directed  to  different  branches  of  pro- 
duction, just  so  far  as  is  most  advantageous  to  producers, 


AGRICULTURE.  151 

or  whether  the  public  welfare  is  so  much  more  concerned 
in  the  products  of  Agriculture,  than  in  those  of  Manufac- 
tures and  Commerce,  that  special  efforts  should  be  made 
to  direct  capital  into  the  former  channel. 

It  is  known,  that  a  sect  of  Political  Economists  former- 
ly existed  in  France,  and  individuals  in  modern  times  hold 
nearly  the  same  doctrines,  which  maintained,  that  Agri- 
culture is  the  only  source  of  national  wealth.  These 
Economists,  for  so  by  way  of  eminence  they  w^ere  called, 
allowed  indeed  that  other  departments  of  labor  were  ad- 
vantageous to  those  engaged  in  them,  that  is,  they  gave 
them  a  support.  And  this,  these  writers  maintained,  was 
all  the  benefit  derived  from  them,  the  same  amount  of  val- 
ue being  consumed  in  the  support  of  these  laborers,  as  was 
produced  by  their  labor. 

A  more  extended  view  of  the  system  of  the  Economists, 
maybe  found  in  Chapter  9,  Book  IV,  of  Smith's  Wealth 
of  Nations.  Two  statements  fully  disprove  the  leading 
proposition,  on  which  this  system  is  founded. 

1.  It  is  well  known,  that  nations  engaged  extensively 
in  manufactures  and  commerce,  have  made  rapid  and  great 
advances  in  wealth  ;  more  so  indeed,  than  some  other  na- 
tions, which  have  confined  their  industry  to  agriculture. 
England  is  an  example  of  the  former  kind,  and  Poland  of 
the  latter.  Now  how  is  this  fact  consistent  with  the  posi- 
tion, that  no  additions  can  be  made  to-individual,  or  nation- 
al wealth,  from  the  labors  of  those  engaged  in  manufactures 
and  commerce  ? 

2.  Taking  the  Economists  on  their  own  grounds,  their 
leading  proposition  may  be  shewn  to  be  erroneous.  They 
allow,  that  producers  in  manufactures  and  commerce  are 
supported  out  of  the  gross  amount  of  products,  which  are 


1^2  POLITICAL  ECONOMY. 

the  result  of  their  labors.  Now  if  this  be  the  case,  these 
branches  of  production  are  important  sources  of  national 
wealth ;  for  in  determining  the  amount  of  national  wealth 
at  any  time,  we  do  not  look  at  the  net  products  but  at  the 
gross  products.  Indeed  agricultural  products,  more  than 
others,  are  immediately  consumed  in  the  support  of  produ- 
cers. And  there  is  evidently  no  reason  for  considering  the 
accumulations  and  additions  made  to  national  capital,  as 
resulting  more  from  agricultural,  than  from  other  branches 
of  production. 

In  modern  times,  there  have  been  those,  who  though  not 
fully  adopting  the  doctrines  of  the  Economists,  have  still 
maintained,  that  agricultural  producers  are  to  be  ranked  in 
the  first  class,  and  that  those  engaged  in  other  branches  of 
production  are  secondaries,  and  in  some  way  dependent 
upon  and  sustained  by,  agricultural  industry  ;  and  many, 
no  doubt,  have  some  general  impressions  of  this  kind, 
without  any  very  definite  opinions  upon  the  subject. 

In  the  introductory  chapter,  it  was  shown,  that  produc- 
tion is  in  its  nature  the  same  in  agriculture,  as  in  other  de- 
partments of  human  industry.  It  must  also  be  the  case, 
that  the  average  profits  of  capital  and  labor  cannot  be  high; 
er,  when  employed  in  agriculture,  than  when  employed 
in  manufactures  and  commerce.  If  it  were  so,  the  latter 
branches  would  be.  deserted  for  the  former.  How  then 
are  we  to  account  for  the  impression,  so  general,  of  the 
superiority  of  agriculture  ?  This  question  has  in  part 
been  answered,  in  the  statement  made  as  to  the  nature  of 
the  wants  supplied  by  agricultural  products,  which  are  of 
the  most  urgent  class,  and  also  of  the  fact,  that  the  mate- 
rials, about  which  other  branches  of  production  are  em- 
ployed, are  derived  from  agriculture. 


AGRICULTURE.  153 

But  there  is  also  another  circumstance,  which  tends  to 
give  rise  to  and  cherish  the  same  impression.  Nations  in 
their  early  stale,  and  as  they  grow  up  to  greatness,  owe 
a  large  share  of  their  increasing  wealth  to  agricultural  pro- 
duction. Here  are  the  beginnings — the  foundation,  to  a 
great  degree,  both  of  individual  and  national  wealth.  And 
this  is  to  be  accounted  for  in  the  following  manner ;  in 
agriculture,  more  than  in  other  branches  of  production, 
natural  agency  comes  to  the  assistance  of  man — it  does  a 
larger  share  of  the  work.  And  here  I  must  ask  the  read- 
er to  call  to  mind  the  distinction  between  natural  agency, 
and  other  natural  aids  in  the  form  of  machinery,  where 
man  is  the  agent,  and  the  natural  aid  the  instrument  by 
which  he  acts.  It  results  then  from  the  superiority  of  the 
assistance,  rendered  by  nature  in  the  first  mentioned  form, 
that  the  returns  of  capital  and  labor  are  greater  in  agricul- 
tural, than  in  manufacturing  or  commercial  production  ;  and 
at  this  period  of  a  nation's  existence,  there  is  nothing  to 
balance  this  superiority  of  agriculture.  But  as  the  nation 
advances,  and  other  branches  of  production  are  more  fully 
introduced,  the  circumstances  of  the  case  become  differ- 
ent. Division  of  labor  and  machinery  come  to  the  aid  of 
production,  and  so  much  greater  is  the  extent  to  which 
they  are  carried  in  Manufactures  and  Commerce,  than  in 
Agriculture,  that  they  compensate,  and  more  than  com- 
pensate, for  the  superior  advantages  derived  from  natural 
agency  in  the  latter  branch. 

And  here  another  circumstance,  tending  to  the  same 
result,  comes  into  operation.  As  nations  become  more 
populous,  and  it  is  necessary,  that  a  larger  amount  of  ag- 
ricultural products  should  be  furnished  for  the  supply  of 
the  wants  of  the  great  national  family,  inferior  soils  must 


154  POLITICAL  ECONOMY. 

be  cultivated, — those  which  yield  a  less  abundant  return 
to  the  capital  and  labor,  employed  in  their  cultivation. 
Thus  the  natural  agency  connected  with  agricultural  pro- 
duction, becomes  less  efficient,  and  this  cause,  conspiring 
with  the  other  causes  just  mentioned,  brings  about  the  re- 
sult, that  in  a  nation,  in  which  the  different  branches  of 
production  are  in  combined  and  joint  action,  no  larger 
amount  of  wealth  is  derived  from  Agriculture,  than  from 
Manufactures  and  Commerce.  And  hence,  the  impres- 
sion we  are  considering,  is  without  just  foundation,  though 
the  circumstances,  which  have  been  mentioned,  may  ac- 
count for  its  origin  and  prevalence. 

Before  leaving  the  subject  of  Agriculture,  it  may  be 
mentioned,  that  the  pleasantness  of  the  employment  in 
this  branch  of  production,  is  such,  as  often  leads  individu- 
als to  prefer  it,  even  when  the  profits  it  affords,  are  less 
than  in  other  departments  of  industry.  There  is  also  a 
sense  of  security  and  independence,  felt  by  the  farmer, 
who  supplies  directly  by  his  own  labor  a  large  proportion 
of  his  own  wants,  and  who  looks  around  upon  his  fields, 
yielding  to  him  in  rich  abundance  the  necessaries  of  life. 
Especially  does  the  landholder  feel  a  higher  sense  of  indi- 
vidual importance,  and  a  deeper  stake  in  the  national  wel- 
fare. But  these,  and  other  like  considerations,  are  brought 
to  view  in  another  connexion. 


Library^ 


MANUFACTURES.  155 


CHAPTER  IX. 


Manuf cultures. 

It  has  been  stated,  that  the  introduction  of  the  mechan- 
ic arts  in  their  more  simple  forms,  must  be  of  the  same 
date  with  the  first  advances  made  in  the  cultivation  of  the 
earth  ;  for  these  advances  cannot  be  made  till  the  more 
common  implements  of  husbandry  are  furnished.  So  too, 
when  the  products  of  agriculture  become  various  and  mul- 
tiplied, the  processes  of  manufactures  are  needed  to  adapt 
these  products  to  the  use  of  man.  But  when  we  speak 
of  a  manufacturing  nation,  or  of  Manufactures,  as  one  of 
the  great  departments  of  national  industry,  we  have  in 
view  a  more  advanced  state  of  the  manufacturing  arts. 
We  think  of  a  community  in  which  a  large  amount  of  in- 
dustry and  capital  are  thus  employed,  and  which  furnish- 
es products  of  this  class,  not  only  for  the  supply  of  its  own 
wants,  but  for  foreign  markets,  and  where  too  machinery 
is  in  extensive  use,  and  large  manufacturing  establishments 
are  scattered  over  the  surface  of  the  country. 

Looking  at  manufactures  in  this  light,  I  propose  to  state 
some  circumstances  favorable  to  the  introduction  and  suc- 
cess of  this  department  of  national  industry,  and  also  to 
shew  the  effects  of  manufacturing  establishments  on  the 
prosperity  of  the  immediate  neighborhood  where  they  are 
located,  and  of  this  department  of  production  on  the  wel- 
fare of  the  country  generally.  Some  general  views  will 
in  another  chapter  be  taken  of  the  expediency  of  measures, 
designed  for  the  encouragement  of  manufactures. 


156  POLITICAL    ECONOMY. 


Circumstances  favorable  to  the  introduction  and  success  of 
Manufactures. 

1.  Territorial  advantages.  Some  countries  seem  pe- 
culiarly adapted  to  become  the  abode  of  a  manufacturing 
people.  In  return  to  agricultural  labor,  employed  either 
in  the  cultivation  of  the  soil,  or  in  the  working  of  mines, 
they  furnish  in  rich  abundance  the  raw  materials,  used  in 
the  most  important  branches  of  manufacturing  production. 
They  offer  also  to  an  uncommon  extent,  facilities  for  the 
construction  of  machinery  and  the  employment  of  the  aids 
of  nature.  Wood  and  metals  of  different  kinds  used  in 
the  mechanic  arts,  extensive  forests  and  coal  mines,  to 
which  has  been  added  increased  importance  from  the  ge- 
neral use  of  steam  power  in  manufactures,  and  more  es- 
pecially water  power  in  the  form  of  mill  privileges,  are  to 
be  ranked  in  this  class.  And  further,  so  essential  to  suc- 
cess in  manufactures  is  an  extensive  market,  that  we  may 
place  among  territorial  advantages  favorable  to  this  branch 
of  production,  navigable  rivers,  commodious  harbors  and 
other  facilities  for  transportation. 

Of  these  different  classes  of  territorial  advantages,  the 
first  merrtioned  is  least  essential,  since  the  materials  of 
most  manufactured  products  may  without  difficulty  be 
supplied  from  abroad.  One  of  the  staple  manufactures  of 
England  is  cotton  cloth,  yet  her  own  territory  does  not 
furnish  to  any  amount  the  materials  of  this  texture.  For 
this  she  is  dependent  on  foreign  nations,  but  the  extent 
and  enterprise  of  her  commercial  industry  amply  compen- 
sate for  this  deficiency. 

2.  Large  amount  of  capital.     A  poor  nation  cannot  be- 


MANDFACTURES.  157 

come  to  an  extensive  degree  a  manufacturing  nation.  A 
leading  object  in  manufactures  is  to  produce  the  largest 
amount  at  the  least  cost  of  production ;  and  to  effect  this 
result,  large  and  expensive  establishments  are  needed. 
Much  must  be  expended  in  the  erection  of  buildings  and 
in  the  construction  of  machinery.  Large  expenditures 
are  also  needed  to  put  these  establishments  in  successful 
operation.  Great  quantities  of  materials  to  be  wrought 
up  into  manufactured  products,  must  be  kept  on  hand, 
and  the  wages  of  numerous  laborers  must  be  paid.  And 
since,  in  some  instances,  a  considerable  time  must  elapse 
before  returns  from  the  sale  of  products  are  received,  a 
proportionally  large  supply  of  capital  must  be  provided. 

In  the  United  States,  where  individuals  possessed  of 
great  wealth  are  rarely  found,  these  expensive  establish- 
ments are  supported  by  joint-stock  companies.  By  this 
arrangement,  the  necessary  capital  is  provided,  and  our 
country  is  enabled  to  enter  the  lists  as  a  successful  com- 
petitor with  older  and  richer  nations.  It  is  obvious,  how- 
ever, that  it  would  not  be  practicable  to  effect  an  accumu- 
lation of  capital  in  this  way,  in  a  country  where  there  is 
a  deficiency  of  capital,  and  where  the  price  of  it,  or  the 
rate  of  interest,  is  high.  This  unfavorable  circumstance 
would  so  essentially  affect  the  cost  ot  production,  that  un- 
less balanced  by  peculiar  advantages  in  other  respects,  it 
would  effectually  prevent  a  nation  from  competing  in  for- 
eign markets  with  other  nations,  in  which  the  price  of 
capital  is  less. 

3.  Low  price  of  labor.   After  all  that  has  been  effected 
by  labor-saving  machines,  labor  still  remains  an  important 
item  in  the  cost  of  manufactured  products.     Hence  a  na- 
tion in  which  the  price  of  labor  is  high,  may  on  this  ac- 
14 


158  POLITICAL  ECONOMY. 

count  find  it  disadvantageous  to  engage  extensively  in 
manufactures.  But  it  should  be  remembered,  that  the 
average  price  of  manufacturing  labor  is  far  less,  than  of 
other  kinds.  This  results  from  the  simplicity  and  ease  of 
many  of  its  processes,  which  allow  of  their  being  perform- 
ed by  females  and  children.  Were  the  average  wages  of 
manufacturers  in  the  United  States  as  high  as  that  of  me- 
chanics, or  even  day  laborers,  it  is  not  probable  that  our 
manufacturing  establishments  could  be  sustained.  But 
instead  of  this,  we  find  connected  with  these  establish- 
ments a  class  of  laborers,  who  otherwise  would  probably 
be  without  employment,  and  whose  average  wages,  com- 
pared with  the  wages  of  other  laborers,  is  low. 

And  here  some  importance  may  be  attached  to  the  cir- 
cumstance, which  is  often  noticed  and  mentioned,  that 
there  are  found  in  nations  certain  characteristic  traits, 
which  seem  to  adapt  them  to  manufacturing  labor.  Thus 
the  inhabitants  of  some  countries  are  more  patient  of  toil 
and  confinement ;  some  have  more  ingenuity  ;  some  have 
the  imitative  principle  more  fully  developed.  However 
these  national  diversities  may  be  accounted  for,  there  is 
reason  to  think,  that,  to  a  greater  or  less  degree,  they  ex- 
ist and  offer  facilities  for  the  successful  introduction  of 
manufactures  into  some  countries,  which  are  not  found  in 
others. 

From  the  known  connexion  between  population  and 
wages,  the  inference  will  here  readily  be  drawn,  that  for 
a  nation  to  become  a  manufacturing  nation,  its  population 
must  be  large.  And  this  will  generally  be  found  to  be 
the  case.  But  the  principles,  which  are  concerned  both> 
in  the  proposition  and  in  the  exceptions  to  it,  will  be  more 


MANUFACTURES.  159 

fully  brought  to  view,  when  treating  on  the  influence  of 
machinery  on  wages. 

Three  circumstances  have  now  been  mentioned  as  fa- 
vorable to  the  introduction  and  success  of  manufactures, — 
territorial  advantages,  large  national  capital,  and  a  low 
price  of  labor.  Sometimes  these  favoring  circumstances 
are  found  existing  together,  and  then,  especially  if  there 
be  added  the  advantage  of  extensive  fl^reign  commerce, 
opening  many  and  profitable  markets  for  manufactured 
products,  we  may  expect  a  nation  to  become  to  a  great 
extent  a  manufacturing  people.  Such  is  the  case  with 
England.  In  other  instances,  some  one  or  two  of  these 
favoring  circumstances  are  found  to  an  extent,  which 
counterbalances  deficiencies  in  the  others.  And  such  na- 
tions may  engage  advantageously  in  manufactures,  espe- 
cially, if  this  deficiency  is  one  which  may  easily  be  sup- 
plied from  abroad. 

But  should  a  nation  be  agitating  the  question,  whether 
it  be  expedient  to  engage  in  manufactures  in  competition 
with  other  nations,  there  are  other  circumstances  to  be 
taken  into  the  account,  in  addition  to  those  now  mention- 
ed. I  refer  particularly  to  the  skill  of  operatives  and  the 
possession  of  the  market,  or  the  course  of  trade.  A  na- 
tion which  for  many  years  has  been  engaged  in  manufac- 
tures, has  those  among  its  inhabitants,  who  are  possessed 
of  great  skill  and  tact  in  this  department  of  labor.  Hence, 
not  only  more  work  will  probably  be  done  in  the  same 
time,  but  it  will  be  executed  in  a  superior  mar.ner.  On 
the  other  hand,  where  manufactures  have  been  lately  in- 
troduced, some  time  must  elapse,  before  those  unaccus- 
tomed to  manufacturing  labor  will  execute  with  equal  ra- 


160  POLITICAL    ECONOMY. 

pidity  and  perfection.  And  further,  the  manufactures  of 
a  nation  frequently  bear  a  character  in  foreign  markets, 
arising  from  their  superior  quality,  which  gives  them,  and 
for  some  time  will  continue  to  give  them,  an  advantage 
over  the  same  class  of  products  of  another  nation,  even 
should  those  of  the  latter  become  equally  good.  Add  to 
this,  that  where  the  course  of  trade  has  become  establish- 
ed, those  who  conduct  it,  are  always  averse  to  changes, 
unless  attended  with  important  benefits. 

Local  effects  of  Manufactories. 

The  suddenness,  with  which  manufacturing  establish- 
ments spring  up,  and  become  imposing  from  their  extent 
and  influence  on  the  surrounding  country,  causing  what 
was  before  a  quiet  and  obscure  agricultural  village  to  be- 
come the  site  of  a  thriving  and  populous  town,  or  city,  is 
often  the  subject  of  remark.  We  are  almost  ready  to 
think,  that  the  tales  of  ancient  fables  have  become  reali- 
ties, and  that  other  powers,  than  those  of  human  industry, 
have  been  called  into  exercise.  But  on  examination,  we 
find,  that  these  striking  results  are  but  the  quickening  in- 
fluences of  a  great  and  sudden,  and,  as  it  may  be  termed, 
an  unnatural  outlay  of  capital.  It  may  be  useful,  then, 
as  developing  the  principles  of  our  science,  briefly  to  trace 
out  some  of  the  consequences,  both  immediate  and  remote, 
which  are  thus  witnessed. 

1 .  Labor  of  every  kind  is  in  requisition.  A  great  work 
is  to  be  done,  and  all  are  called  upon  to  come  and  assist 
in  its  accomplishment.  Full  and  profitable  employment 
is  given  to  common  laborers  and  to  mechanics  of  every 
class,  not  only  to  those  previously  located  in  the  neigh- 


VIANUFACTURES.  161 

borhood,  but  to  those  who  in  crowds  rush  in  from  abroad. 
With  the  increase  of  business  and  of  population,  profes- 
sional labor  comes  more  into  demand.  Physicians  and 
lawyers  find  their  services  in  more  constant  requisition, 
and  the  number  of  these  unproductive  laborers  is  increas- 
ed. Indeed  every  member  of  the  community  who  is  dis- 
posed to  work,  finds  a  ready  anc  profitable  employment 
in  which  to  engage.  And  it  is  in  this  constant  and  well 
paid  demand  for  labor,  more  than  in  an  advance  of  wages, 
that  the  genial  effects  of  this  new  outlay  of  capital  are  felt 
by  the  laboring  part  of  the  population.  It  is  true,  that  in 
some  branches  of  labor  there  will  often  be  an  advance  of 
wages,  but  this  effect  is  prevented  from  being  generally 
the  case  by  the  coming  in  of  large  numbers  from  abroad. 

2.  There  is  a  sudden  rise  in  the  price  of  agricultural 
products.  Provision  must  be  made  for  the  supply  of  the 
wants  of  the  multitude  thus  collected  together.  Hence 
all  the  products  of  the  farm  are  in  demand,  and  as  the  na- 
ture of  agricultural  products  is  such,  that  they  cannot  be 
brought  from  a  distance  without  having  their  price  much 
increased  by  the  cost  of  transportation,  the  products  of  this 
class  raised  in  the  neighborhood,  will  be  sold  at  the  same 
advance.  Thus  there  will  be  a  sudden  rise  in  the  price 
of  agricultural  products.  And  this  advance  of  price  will 
continue,  till  new  land  is  brought  under  cultivation,  and  a 
supply  is  furnished,  which  shall  meet  the  increased  de- 
mand. 

3.  A  sudden  and  great  rise  in  the  value  of  houses,  lands, 
and  whatever  is  included  under  the  phrase — real  estate. 
This  effect  is  felt  most  strongly  in  the  immediate  vicinity 
of  the  manufactories.  The  great  increase  of  the  popula- 
tion creates  a  demand  for  houses,  and  leads  to  the  erec- 

14* 


162  POLITICAL    ECONOMY. 

tion  of  many  new  habitations,  and  as  each  one  is  desirous 
of  a  site  for  his  buildings  near  the  centre  of  business,  land 
thus  situated,  is  sold  at  a  high  price.  A  few  months  trans- 
form the  waste  and  comparatively  valueless  pasture  into 
the  site  of  a  populous  city,  and  more  is  obtained  for  a  sin- 
gle square  rod,  than  was  paid  before  for  many  acres.  To 
the  fortunate  proprietors  of  these  lands,  there  comes  a  sud- 
den flow  of  wealth,  like  a  lottery  prize  ;  and  they  exchange 
the  toils  and  the  simple  style  of  the  farmer,  for  the  anxie- 
ties and  the  luxuries  of  the  wealthy  capitalist. 

But  this  rise  in  the  value  of  land  is  not  confined  to  the 
immediate  vicinity  of  the  new  establishment.  The  effects 
of  the  increased  demand  for  agricultural  products  and  of 
their  advanced  price,  is  felt  for  miles  around,  and,  as  the 
lands  of  the  farmer  are  brought  nearer  to  a  market  for  the 
products  which  he  raises,  he  finds  their  value  increased. 

I  have  now  stated  the  immediate  results  to  a  neighbor- 
hood, or  village,  of  a  large  outlay  of  capital  in  the  estab- 
lishment of  manufactories.  But  these  hot-bed  influences 
are  of  short  continuance.  Should  we  look  in  upon  the 
same  manufacturing  town,  or  city,  after  five  or  ten  years 
have  elapsed,  we  might  still  find  a  thriving  and  industrious 
community  ;  but  the  demand  for  labor  in  the  different  oc- 
cupations of  life,  and  of  the  various  kinds  of  agricultural 
products,  is  not  greater  perhaps,  in  proportion  to  the  sup- 
ply, than  in  other  prosperous  villages,  in  which  no  manu- 
factories have  been  located.  Some  permanent  salutary 
effects  of  the  stimulus  given  to  agricultural  production,  are 
indeed  seen  in  the  highly  cultivated  farms  and  rich  fields 
of  the  surrounding  country,  and  the  high  value  of  land  in 
the  immediate  neighborhood  still  continues,  though  to  the 
present  proprietors  there  is  little  advance,  perhaps  none, 


MANUFACTURES.  163 

on  the  prices  they  have  paid.  Business  has  returned  to 
its  usual  channels,  and  except  that  there  is  a  fuller  and  a 
quicker  flow,  the  current  of  affairs  goes  onwards  as  be- 
fore. 

The  statement  which  has  been  made,  is  where  the  con- 
sequences which  follow  from  the  establishment  of  manu- 
factories, are  of  a  salutary  kind.  In  other  instances,  the 
stimulus  given  is  far  greater  than  is  justified  by  the  outlay 
of  capital,  or  conducive  to  the  interests  of  the  community. 
There  is  a  species  of  insanity,  or  wild  adventure,  which 
characterises  every  business  transaction.  The  prices  of 
real  estate  and  of  commodities  generally  are  exorbitantly 
high,  and  laborers  crowd  in  from  every  quarter. 

But  after  a  few  months  have  elapsed,  the  mania  is  over 
— those  who  have  made  purchases  of  land  and  other  ob- 
jects of  the  nature  of  real  estate,  sell  at  a  loss,  and  many 
individuals,  both  professional  men  and  others,  who  had 
crowded  to  the  new  centre  of  business,  expecting  to.  find 
full  and  profitable  employment,  retire  with  disappointment 
and  loss.  And  thus  again,  though  their  sudden  rise  has 
not  been  equally  harmless  and  fertilizing,  the  swollen  wa- 
ters subside. 

Advantages  derived  from  Mamifactures  as  a  branch  of  na- 
tional industry. 

It  is  now  proposed  to  extend  the  view,  and  to  look  at 
the  benefits  which  arise  to  a  nation  from  this  branch  of 
production.  It  is  supposed  in  the  statement  here  made, 
that  in  connexion  with  Agriculture  and  Commerce,  Manu- 
factures are  in  full  and  successful  operation,  and  it  is  de- 


164  POLITICAL  ECONOMY. 

signed  to  point  out  the  advantages  derived  from  this  mode 
of  employing  capital  and  industry. 

1.  Manufactures  lead  to  the  developement  of  the  terri- 
torial advantages  of  a  nation. 

I  have  already,  in  this  chapter,  made  mention  of  the 
territorial  advantages  favorable  to  the  introduction  of  manu- 
factures. Of  one  class  of  them — such  as  water-privileges 
and  metals  and  woods  used  in  the  construction  of  machine- 
ry, no  use,  or  a  very  limited  one,  will  be  made,  where 
manufactures  are  not  found.  Indeed  the  existence  of 
many  of  these  natural  aids  to  production  within  the  limits 
of  the  nation,  will  be  unknown ;  or  if  they  are  known  to 
exist,  no  sufficiently  strong  motive  will  lead  to  their  de- 
velopement. Here  and  there,  as  the  wants  of  the  country 
require,  a  fine  water-privilege  will  become  the  site  of  a 
common  grist-mill,  but  in  such  instances  there  is  perhaps 
a  waste  of  water-power  to  ten  times  the  amount  of  that 
which  is  improved.  So,  to  a  limited  extent,  metals  and 
woods  used  in  the  arts;  may  be  employed  by  mechanics 
and  in  rude  manufactories,  but  no  well  directed,  systemat- 
ic efforts  are  made,  to  bring  into  use  the  mineral  treasures 
of  the  country,  or  its  other  natural  aids  to  production,  used 
in  manufactures.  But  now  let  different  branches  of  manu- 
facturing industry  be  introduced,  and  the  influence  in  de- 
veloping this  class  of  territorial  advantages  is  at  once  felt 
by  the  nation.  Its  water-privileges  become  valuable  and 
are  turned  to  good  account ; — its  coal-mines  and  beds  of 
iron  and  other  ores  are  discovered,  and  made  to  yield  their 
treasures  as  aids  in  the  great  work  of  production.  Other 
materials  used  in  the  construction  cf  machinery,  are  also 
sought  after  and  made  useful. 


MANUFACTURES.  165 

On  the  other  class  of  territorial  advantages — those 
which  adapt  the  country  to  furnish  the  materials  of  which 
manufactures  are  composed,  a  similar  effect  is  exerted. 
Some  developement  may  have  been  made  in  furnishing 
supplies  to  other  nations,  but  the  existence  of  manufac- 
tures at  home,  leads  to  the  production  of  a  much  larger 
amount  of  this  class  of  agricultural  products.  At  the  same 
time  perhaps  that  supplies  continue  to  be  furnished  to  for- 
eign nations,  an  equal,  or  even  larger  amount,  is  required 
to  meet  the  demands  of  home  consumption. 

The  present  state  of  England  as  to  the  developement  of 
its  territorial  advantages,  especially  if  contrasted  with  what 
in  this  respect  is  witnessed  in  other  European  nations,  of- 
fers an  illustration  of  the  statements  here  made.  Or  we 
might  even  contrast  what  is  seen  at  the  present  time  in 
the  United  States,  with  the  condition  of  the  country  thir- 
ty years  ago.  Either  instance  teaches  an  instructive  les- 
son, as  to  the  effects  of  manufactures  on  the  developement 
of  territorial  advantages. 

2.  Manufactures  offer  profitable  employment  to  the  in- 
dustry and  capital  of  a  country. 

In  the  early  periods  of  a  nation's  existence,  full  and  prof- 
itable employment  to  its  industry  and  capital  will  be  found 
in  agricultural  labors,  but  as  advances  are  made  in  wealth 
and  population,  its  prosperity  requires,  that  new  modes  of 
employing  its  productive  resources  should  be  opened. 
The  diflferent  branches  of  manufactures  offer  these  new 
kinds  of  employment,  and  that  they  are  highly  profitable 
to  a  nation,  may  be  inferred  from  the  following  statements. 

Manufactures  allow  of  division  of  labor  to  a  greater 
extent  than  other  branches  of  industry.  This  was  shewn 
to  be  the  case  in  the  preceding  chapter  on  economical  ar- 


166  POLITICAL    ECONOMY. 

rangements.  It  was  also  there  stated,  that  division  of  labor 
tends,  for  different  reasons  there  assigned,  to  render  human 
industry  more  efficient,  and  to  increase  the  amount  of  pro- 
ducts. Hence  then  the  inference  is  easily  drawn,  that 
manufactures  offer  profitable  modes  of  employing  industry 
and  capital. 

Labor  saving  machinery  is  used  far  more  extensively 
in  manufactures,  than  in  other  branches  of  production. 
This  proposition  is  closely  connected  with  the  preceding, 
for  it  is  division  of  labor,  which,  by  dividing  and  render- 
ing more  simple  the  processes  of  production,  leads  to  the 
invention  and  more  extensive  use  of  machinery.  But  em- 
ployments which  allow  of  the  extensive  use  of  machine- 
ry, are  highly  profitable.  Here  then  is  a  second  argu- 
ment in  support  of  our  leading  proposition. 

Manufactures  are  profitable  as  a  branch  of  national- in- 
dustry, since  they  caJl  forth  a  larger  amount  of  productive 
labor,  than  would  otherwise  exist.  I  refer  particularly  to 
the  labor  of  women  and  children,  who  are  seldom  produc- 
tively employed,  except  in  some  branch  of  rtianufactures. 
In  every  community  also  some  are  found  in  the  class  of 
laborers,  who  from  the  constitution  of  their  minds,  or  their 
general  habits,  both  of  mind  and  body,  seem  particularly 
fitted  to  engage  in  manufacturing  labor,  and  whose  industry 
would  otherwise  be  probably  lost  to  the  community. 
Both  these  circumstances  have  before  been  referred  to, 
and  they  are  of  importance  in  the  view  now  taken  of 
them. 

3.  Manufactures  exert  a  highly  stimulating  effect  on 
other  branches  of  national  industry. 

The  stimulating  effects  of  manufactories  on  agricultural 
production,  was  brought  to  view,  when  treating  on  the 


MANUFACTURES.  '      167 

local  influences  of  these  establishments.  Now  what  is 
true  of  a  village  or  neighborhood,  will  to  some  extent  hold 
true  of  a  whole  country,  when  manufactories  are  scattered 
over  its  surface,  so  far  as  its  territorial  advantages  will  al- 
low of  their  establishment.  The  extension  of  manufac- 
tures, connected  as  it  is  with  an  increased  demand  for  ag- 
ricultural products  and  a  consequent  advance  of  their 
price,  brings  many  tracts  of  land,  which  have  before  been: 
left  unimproved,  into  the  proximity  of  a  market,  and  caus- 
es them  to  be  cultivated.  It  also  leads  those  employed 
in  agricultural  pursuits  to  be  more  industrious  and  enter- 
prising, and  thus  the  stimulating  effect  of  manufactures  is 
felt  in  this  branch  of  production. 

Agricultural  production  will  still  further  be  stimulated 
by  the  demand  for  those  products,  which  are  the  materi- 
als of  manufactures.  This,  if  it  does  not  open  a  new  field 
of  agricultural  industry,  greatly  extends  those  which  be- 
fore existed,  and  is  an  important  source  of  revenue  to  the 
farmer.  Such  is  the  effect  of  woollen  manufactures  on 
the  raising  of  sheep,  and  of  cotton  manufactures  on  the 
culture  of  cotton.  It  is  true,  as  has  been  stated,  that  for 
products  of  this  class  a  market  may  be  found  in  foreign 
countries ;  and  this  may  still  continue  to  be  the  case,  the 
domestic  demand  being  superadded  to  the  foreign.  And 
here  it  may  be  remarked,  that  for  agricultural  products,  a 
domestic  market  is  generally  preferred  to  a  foreign  one  ; 
but  of  this  more  will  be  said  hereafter. 

The  stimulating  effects  of  manufactures  on  commercial 
production  are  also  obvious.  Materials  for  manufactures 
are  to  be  brought  from  abroad,  or  from  different  sections 
of  the  same  country,  or  collected  from  the  immediate 
neighborhood.     Manufactured  articles  must  also  either  be 


168  POLITICAL  ECONOMY. 

conveyed  to  foreign  markets,  or  scattered  about  for  home 
consumption.  Thus,  in  different  ways,  new  employment 
will  be  afforded  to  commercial  industry  and  capital.  In- 
deed, the  general  principle  which  relates  to  commercial 
production,  might  here  be  applied — that  in  proportion  to 
the  variety  of  products  furnished  by  a  nation,  will  be  the 
extent  of  its  commerce  ;  since  this  variety  both  holds  out 
an  additional  inducement  to  foreign  customers,  and  in- 
creases the  objects  of  home  production  for  exportation  to 
foreign  markets. 

Objections  to  Manufactures. 

Of  the  objections  made  to  manufactures,  a  part  relate 
» to  the  condition  and  interests  of  laborers  in  this  depart- 
ment of  industry  ;  others  are  more  closely  connected  with 
the  general  welfare  and   prosperity  of  the  country.     It  is 
to  the  latter  that  I  now  propose  to  direct  the  attention. 

There  is  a  prevailing  impression,  that  the  prosperity  of 
nations  extensively  engaged  in  manufactures  is  less  sure 
and  stable,  than  that  of  nations  devoted  to  other  branches 
of  production.  This  impression,  when  the  reasons  of  it 
are  sought  after,  may  be  traced  to  the  following  sources  : 

1.  It  is  supposed,  that  there  is  a  strong  tendency  to 
excess,  in  the  extent  to  which  industry  and  capital  are  di- 
rected to  this  branch  of  production.  This  tendency  is  ac- 
counted for  by  the  statement  respecting  the  local  effects  of 
manufacturing  establishments,  which  was  made  in  a  preced- 
ing part  of  this  chapter.  The  sudden  and  striking  pros- 
perity of  villages,  in  which  manufactories  are  located,  is 
known  to  all,  and  wherever,  through  the  country,  territo- 
rial advantages  of  a  similar  nature  are  found,  it  is  natural, 


MANUFACTURES.  169 

that  the  desire  of  turning  them  to  good  account  should  be 
felt.  Hence,  in  the  connmon  language  of  the  country, 
the  business  is  overdone.  More  manufactories  are  estab- 
lished, than  the  amount  of  capital  in  the  nation,  or  the 
demand  for  products  of  this  kind,  will  sustain,  and  thus 
losses  and  embarrassment  follow. 

It  must  be  acknowledged,  that  what  is  here  stated  is 
sometimes  witnessed  and  seen  to  be  true.  But  it  will  be 
noticed,  that  these  embarrassments  and  losses  are  connect- 
ed with  the  first  establishment  of  manufactures  in  a  coun- 
try, or,  as  it  sometimes  happens,  with  special  encourage- 
ment given  to  this  branch  of  national  industry  by  the 
government  of  the  country.  Where  manufactures  have 
been  fully  introduced,  and  a  regular  course  of  business  as 
to  markets  and  amount  of  products  is  established,  no  in- 
conveniences of  this  kind  will  attend  them.  So  far  then, 
there  is  ground  for  objection,  not  against  the  branch  of 
production  itself,  but  against  some  circumstances  which 
attend  its  establishment  in  a  country. 

2.  But  it  is  said,  that  after  manufactures  have  been 
introduced,  and  a  regular  course  of  business  is  established, 
there  is  a  tendency  to  over-production  and  its  consequent 
evils.  And  perhaps  facts  are  appealed  to  in  support  of 
this  assertion.  Our  attention  is  directed  to  the  gluts, 
which  not  unfrequently  occur  in  manufacturing  nations, 
with  the  consequent  depression  of  prices  and  other 
evils  that  follow  in  the  same  train. 

In  reply  to  this  objection,  it  may  be  said,  that  over- 
production is  not  peculiar  to  Manufactures.  It  is  seen 
both  in  Agriculture  and  Commerce.  A  year  of  scarcity 
as  to  the  staple  commodities  of  agriculture,  is  almost  sure 
to  be  followed  by  a  year  of  over-production  of  the  same 
15 


170  POLITICAL  ECONOMY. 

commodities.  It  is  so  in  commerce  ;  here  it  is  called 
over-trading,  and  the  eJfFects  which  follow,  are  often  more 
extensive  and  disastrous  than  in  manufactures.  But  while 
over-production  is  found  in  other  departments  of  national 
industry,  there  are  two  reasons,  why  the  effects  which  at- 
tend it  are  especially  noticed  in  manufactures.  1 .  From  the 
extent  to  which  competition  is  carried  in  some  branches 
of  manufactures,  those  who  undertake  and  conduct  these 
processes  of  production,  are  compelled  to  content  them- 
selves with  a  low  rate  of  profits.  A  slight  reduction  of 
price  on  any  article  produced,  is  therefore  soon  felt.  It 
falls  at  once  below  the  cost  of  production,  and  as  the 
amount  concerned  is  large,  important  consequences  follow 
to  the  producers.  In  other  instances  of  over-production, 
as  in  agriculture,  where  the  rate  of  interest  is  higher,  the 
effects  of  a  small  reduction  of  price  on  any  commodity, 
are  not  so  soon  felt,  neither  is  the  amount  concerned  so 
large.  Hence  the  loss  is  easily  sustained,  and  is  balanc- 
ed by  the  larger  profits  of  another  year.  In  commerce, 
also,  the  average  rate  of  profits  is  higher,  and  calculations 
are  made  to  meet  those  losses  which  may  arise  from  vari- 
ations of  price.  2,  Another  reason,  why  over-produc- 
tion in  manufactures  attracts  more  attention,  than  in  agri- 
culture or  commerce,  is,  that  the  number  of  those  whose 
interests  are  immediately  affected,  is  much  larger.  It  is 
obvious,  that  when  large  numbers  of  those  dependent  on 
the  fruits  of  their  labor  for  daily  support,  are  deprived  of 
employment,  the  consequences  must  be  severely  felt  and 
extensively  known. 

3.  It  is  further  objected  to  manufactures,  that  products 
of  this  kind  are  peculiarly  liable  to  feel  the  influence  of 
fashion,  and  that  on  this  account  their  value  will  be  sub- 


MANUFACTURES.  171 

ject  to  variation.  Some  kind  of  cloth,  for  example,  at 
one  time  is  fashionable.  The  demand  for  it  is  great,  and 
the  price  high.  The  manufacturer  adapts  his  outlay  to 
meet  this  increased  demand,  but  before  the  new  and  lar- 
ger supply  of  cloth  is  in  the  market,  the  fashion  changes 
— the  price  falls,  and  a  consequent  loss  is  sustained. 
And  not  only  is  there  a  loss  on  the  products  themselves, 
but  perhaps  to  some  extent  on  the  machinery  used  in 
making  them. 

In  reply  to  this  statement,  it  is  said,  that  the  influence 
of  fashion  is  felt  but  little  on  those  products,  which  are  of 
general  consumption,  and  which  are  produced  in  large 
quantities.  Fashion  has  more  to  do  with  luxuries,  than 
with  the  common  every  day  articles  of  hfe  ;  hence  the 
rate  of  profits  on  the  former  class  of  products  is  higher, 
and  thus  provision  is  made  for  whatever  losses  may  arise 
from  this  source.  And  further,  when  losses  of  this  kind 
occur,  they  fall  on  commercial  producers,  no  less  than  on 
manufacturers.  Those  employed  in  manufacturing,  do 
not  usually  keep  their  products  on  hand  a  long  time. 
They  are  compelled  to  make  arrangements  for  quick  re- 
turns of  capital,  and  hence  they  lose  perhaps  only  on  what 
is  in  the  process  of  production,  when  the  change  of  fash- 
ion occurs.  And  in  respect  to  losses  on  machinery,  it  is 
said,  that  what  is  thus  thrown  out  of  use,  generally,  with 
some  modification,  admits  of  being  adapted  to  some  other 
form  of  production  ;  and  thus  the  loss  arising  from  this 
source  is  small. 

4.  One  other  objection  to  manufactures,  which  is  sup- 
posed to  give  support  to  the  prevailing  impression  of  the 
instability  of  this  kind  of  property,  remains  to  be  consid- 
ered.    It  is  said,  that  a  manufacturing  nation  is  depend- 


172  POLITICAL    ECONOMY. 

ent  on  foreign  markets  for  the  sale  of  its  products,  and 
that  hence,  in  addition  to  the  disturbing  causes  of  price, 
which  are  found  at  home,  and  which  apply  in  some  meas- 
ure to  all  branches  of  production,  there  is  opened  a  new 
source  of  uncertainty  and  variation  in  the  value  of  manu- 
factured products.  War  may  break  out  and  hinder  the 
operations  of  foreign  commerce.  The  policy  of  nations 
abroad  may  change,  and  they  may  forbid  the  importation 
of  manufactures.  Other  nations  may  enter  the  lists  as 
competitors  for  these  foreign  markets,  and  become  suc- 
cessful rivals.  From  either  of  these  causes,  or  from 
others  of  a  like  nature,  the  sale  of  manufactured  products 
may  be  prevented  and  their  value  affected. 

A  very  general  answer  is  all  that  can  here  be  given  to 
this  objection.  The  influence  of  foreign  markets  here 
brought  to  view,  is  not  confined  to  manufactures.  An  ag- 
ricultural nation  may  be  wont  to  look  to  foreign  markets 
as  a  vent  for  its  surplus  products,  and  may  therefore  feel 
the  effects  of  a  war — of  a  change  of  foreign  policy,  or  of 
the  success  of  a  rival  competitor  in  the  market.  It  is 
true,  that  in  the  case  of  agricultural  products,  other  mar- 
kets may  perhaps  be  found  with  less  difficulty,  and  the 
loss  sustained  on  invested  capital  will  also  be  less.  A 
new  direction  is  given  to  the  productive  energies  of  the 
country  with  less  inconvenience  and  loss. 

After  all  however  it  must  be  allowed,  that  nations  ex- 
tensively engaged  in  manufactures  and  dependent  on  for- 
eign markets  for  the  sale  of  their  products,  are  peculiarly 
exposed  to  the  disturbing  influences  which  have  been 
mentioned ;  and  on  this  account  capital  thus  vested, 
ought  in  some  way  to  be  indemnified  for  the  risk  that  is 
incurred. 


COMMERCE. 


173 


The  question,  how  far  the  government  of  a  country 
should  assist  in  the  introduction  and  support  of  manufac- 
tures, or,  as  it  is  usually  stated,  what  encouragement 
should  be  given  to  domestic  industry,  has  been  much  agi- 
tated, and  is  a  leading  inquiry  in  the  science  of  Political 
Economy.  This  question  here  presents  itself  for  our 
consideration,  but  since  the  manner  of  giving  encourage- 
ment is  connected  with  commerce,  forming  what  is  called 
the  restrictive  system,  I  have  thought  it  best  to  defer  the 
whole  subject,  until  the  nature  of  this  remaining  branch  of 
national  industry  has  been  explained. 


CHAPTER  X. 


Commerce. 

Commercial  industry  includes  two  operations,  which, 
though  generally  connected,  are  in  themselves  distinct. 
One  is  the  buying  and  selling  of  commodities ;  the  other 
their  transportation.  I  speak  of  them  as  distinct  opera- 
tions, since  one  may  be  performed  when  the  other  is  not. 
Commodities  may  have  their  value  increased  by  the  pur- 
chase and  sale  of  them,  while  they  remain  undisturbed  in 
the  ware-house  or  granary.  Their  value  may  also  be  af- 
fected by  transportation,  when  they  are  neither  purchas- 
ed nor  sold.  Usually  however  the  two  operations  are  uni- 
ted, and  together  constitute  commercial  production. 

Some  writers  in  Political  Economy  have  been  disposed 
to  limit  commercial  production  to  transportation.  They 
have  maintained,  that  the  only  way  in  which  value  is  ad- 
15* 


174  POLITICAL  ECONOMY. 

ded  to  products  by  commercial  industry,  is  in  conveying 
them  from  one  place  to  another,  and  offering  them  to  con- 
sumers under  such  circumstances  as  may  suit  their  conve- 
nience. Such  is  the  opinion  of  Say.  But  it  is  thought, 
that  this  is  too  limited  a  view  of  the  nature  of  commercial 
production,  and  that  it  should  be  extended  so  as  to  in- 
clude the  purchase  and  sale  of  commodities.  It  is  not 
meant  by  this  assertion,  that  commodities  increase  in  value 
from  the  simple  act  of  passing  from  the  possession  of  one 
man  into  that  of  another.  Neither  is  it  supposed,  as 
some  seem  to  have  thought,  that  in  all  transactions  of  a 
commercial  nature,  what  one  gains  another  loses.  But  it . 
is  meant,  that  in  the  existing  economical  arrangements  of 
society,  the  very  act,  which  is  performed  by  the  mer- 
chant, of  standing  between  the  producer  "and  consumer, 
advancing  to  the  former  capital  and  receiving  products  in 
return,  and  then  handing  over  these  products  to  the  latter, 
receiving  back  capital  in  return,  is  a  transaction,  which 
both  facilitates  the  economical  processes  of  the  communi- 
ty, and  adds  value  to  the  products  in  relation  to  which  it 
is  performed. 

To  establish  this  point,  let  us  analyse  the  operation  of 
buying  and  selling.  Suppose  a  certain  amount  of  manu- 
factured products  to  be  in  a  finished  state  and  ready  for 
delivery  to  the  consumers.  But  the  manufacturer  is  not 
able  to  find  a  market  for  them,  and  they  remain  on  his 
hands  for  one  month,  during  which  time  he  is  endeavor- 
ing to  effect  a  sale.  In  this  instance  then,  there  is  inter- 
est to  be  paid  on  capital,  and  also  remuneration  for  over- 
sight and  labor,  both  of  which  are  to  be  set  down  to  the 
account  of  selling  the  commodities  concerned.  Again, 
here  is  a  numerous  family,  whose  daily  consumption  re- 


COMMERCE.  175 

quires  a  supply  of  many  products,  both  agricultural  and 
manufactured,  or  a  large  manufacturing  establishment,  for 
which  a  supply  of  the  raw  material  must  be  furnished. 
Suppose,  now,  that  to  furnish  these  supplies,  various  as 
they  are  in  one  case  and  large  in  the  other,  it  were  neces- 
sary in  each  instance  to  collect  them  from  those  by  whom 
they  are  produced.  How  much  time  and  labor  and  cap- 
ital would  thus  be  consumed  ! 

Now  it  is  for  the  performance  of  what  in  these  suppos- 
ed cases  is  done  by  the  producer  and  the  provider,  that 
the  merchant  comes  in  with  his  capital  and  personal  ser- 
vices, and  takes  upon  himself  the  management  and  re- 
sponsibility of  the  whole  transaction.  To  the  manufac- 
turing producer,  he  advances  payment  for  his  products 
when  ready  for  delivery,  thus  saving  to  hirn  further  inter- 
est on  his  capital  and  the  labor  and  care  of  finding  a  pur- 
chaser. To  the  provider,  either  for  the  family  or  the 
manufactory,  he  comes,  bringing  into  his  neighborhood 
the  very  articles,  both  as  to  variety  and  amount,  which 
are  needed.  Thus  then  an  important  service  is  rendered 
— a  service  that  requires  an  outlay  of  capital  and  labor, 
and  which,  since  it  adds  value  to  products,  for  the  same 
products  in  the  hands  of  consumers  are  worth  more  than 
in  the  hands  of  producers,  may  strictly  be  considered  an 
act  of  production. 

In  respect  to  the  other  part  of  the  process  of  commer- 
cial production,  its  nature  is  more  easily  understood. 
Every  one  is  aware,  that  a  commodity  receives  an  acces- 
sion of  value  by  being  brought  to  a  market,  or  into  the 
neighborhood  of  consumers.  Indeed  in  respect  to  many 
commodities,  a  large  proportion  of  their  value  results  from 
transportation.     It  is  also  obvious,  that  in  the  work  of 


170  POLITICAL  ECONOMY. 

transportation  J  human  industry,  capital  in  various  forms, 
and  the  aids  of  nature,  are  called  into  exercise.  Here 
too  is  division  of  labor.  There  is  retail,  wholesale,  do- 
mestic and  foreign  commerce,  each  of  which  in  its  subdi- 
visions and  different  operations,  gives  employment  to  nu- 
merous laborers.  This  part  of  commercial  production  ad- 
mits also  of  the  improved  use  of  the  aids  of  nature.  Every 
year  is  offering  labor-saving  inventions  of  this  kind  in  the 
form  of  railroads,  railroad  cars,  steamboats,  carriages  &c. 

We  are  then  to  understand  by  commerce  both  the  pur- 
chase and  sale  of  commodities,  and  their  transportation, 
thus  calling  into  action  the  different  agents  of  production, 
and  adding  new  value  to  the  products  of  agriculture  and 
manufactures. 

Those  circumstances  in  the  nature  and  condition  of 
man,  which  give  rise  to  exchange  and  barter,  were 
brought  to  view  in  a  preceding  chapter.  Commerce,  as 
a  distinct  form  of  industry,  giving  employment  to  capital 
and  requiring  a  separate  class  of  laborers,  is  of  gradual 
growth,  increasing  with  the  advancement  and  enlargement 
of  society.  At  first,  perhaps,  it  is  restricted  to  the  ex- 
change of  the  surplus  products  of  the  farm,  but  as  new 
branches  of  industry,  both  agricultural  and  manufacturing, 
are  introduced,  and  a  greater  variety  and  amount  of  pro- 
ducts exist  in  the  nation,  it  enlarges  itself,  and  becomes 
established  as  a  distinct  system  of  production  with  its  di- 
visions and  subdivisions.  There  are  also,  as  in  manufac- 
tures, territorial  advantages,  which  conduce  to  the  success 
and  prosperity  of  this  branch  of  production.  Such  are 
navigable  rivers  extending  far  into  the  interior  of  a  coun- 
try, commodious  bays  and  harbors,  and  materials  used  in 
the  construction  of  ships,  and  of  other  vehicles  employed 


COMMERCE.  177 

both  in  land  and  water  carriage  of  commodities.  A  na- 
tion extensively  engaged  in  commerce,  must  also  possess 
a  large  productive  capital.  This  is  necessary,  not  only 
as  capital  is  required  for  the  conducting  of  commercial 
production  itself,  but  as  its  existence  is  implied  in  the  am- 
ple supply  of  agricultural  and  manufactured  products  which 
is  the  basis  of  commerce. 


Divisions  of  Commercial  Industry. 

Commerce  has  been  divided  into  retail  and  wholesale, 
and  also  into  domestic  and  foreign  trade.  With  the  mean- 
ing of  these  terms  all  are  familiar ;  and  though  the  same 
leading  principles  apply  to  every  branch  of  commercial 
production — to  the  pedlar  with  his  merchandise  upon  his 
back,  and  to  the  opulent  merchant  whose  warehouses  are 
filled  with  the  products  of  different  climes,  there  are  pe- 
culiar circumstances,  which  affect  their  application  to  these 
several  divisions.  I  design  therefore  to  consider  separate- 
ly, each  of  these  leading  branches  of  commercial  produc- 
tion. 

Retail  Trade. 

It  is  the  business  of  the  retailer,  to  bring  the  commodi- 
ties in  which  he  deals,  into  the  immediate  vicinity  of  con- 
sumers, and  to  offer  them  in  such  quantities  and  under 
such  circumstances,  as  may  suit  their  convenience.  In  a 
newly  settled  country,  where  the  inhabitants  are  few  and 
scattered  over  a  wide  extent  of  territory,  the  merchant 
with  his  wares  upon  his  back,  or  in  his  travelling  cart, 
visits  every  family.     In  other  instances,  fairs  are  held — ► 


178  POLITICAL    ECONOMY. 

that  is,  on  appointed  days  the  merchants  of  the  country 
congregate  together  in  one  place,  and  there  expose  their 
merchandise  for  sale  ;  and  to  this  market  the  whole  neigh- 
boring population  resort  for  a  supply  of  their  wants. 
When  a  country  has  become  more  densely  settled,  the 
retailer  locates  himself  in  some  village,  or  neighborhood. 
He  there  erects  his  storehouse,  and  supplying  it  with  mer- 
chandise suited  to  the  market,  devotes  himself  to  the  busi- 
ness of  buying  and  selling. 

That  important  service  is  rendered  to  society  by  the 
retail  merchant,  may  easily  be  shewn.  *'  Unless,"  says 
Smith,  "  a  capital  was  employed  in  breaking  and  dividing 
certain  portions  either  of  the  rude  or  manufactured  pro- 
duce, into  such  small  parcels  as  suit  the  occasional  de- 
mands of  those  who  want  them,  every  man  would  be 
obliged  to  purchase  a  greater  quantity  of  the  goods  he 
wanted,  than  his  immediate  occasions  required.  If  there 
was  no  such  trade  as  a  butcher,  for  example,  every  man 
would  be  obliged  to  purchase  a  whole  ox  or  a  whole  sheep 
at  a  time.  This  would  generally  be  inconvenient  to  the 
rich,  and  much  more  so  to  the  poor.  If  a  poor  workman 
was  obliged  to  purchase  a  month's  or  six  months'  provi- 
sions at  a  time,  a  great  part  of  the  stock  which  he  employs 
as  a  capital  in  the  instruments  of  his  trade,  or  in  the  fur- 
niture of  his  shop,  and  vvhich  yields  him  a  revenue,  he 
would  be  forced  to  place  jn  that  part  of  his  stock  which  is 
reserved  for  immediate  consumption,  and  which  yields  him 
no  revenue.  Nothing  can  be  more  convenient  for  such  a 
person  than  to  be  able  to  purchase  his  subsistence  from 
day  to  day,  or  even  from  hour  to  hour,  as  he  wants  it. 
He  is  thereby  enabled  to  employ  almost  his  whole  stock 
as  a  capital.     He  is  thus  enabled  to  furnish  work  to  a 


COMMERCE.  179 

greater  value,  and  the  profit  which  he  makes  by  it  in  this 
way,  much  more  than  compensates  the  additional  price 
which  the  profit  of  the  retailer  imposes  upon  the  goods." 

A  prejudice  against  retailers,  which  exists  in  the  minds 
of  some  portions  of  the  community,  may  here  be  noticed.' 
It  is  often  thought,  that  the  profits  of  this  branch  of  trade 
are  exorbitantly  high,  and  that  in  some  way,  retailers  get 
the  advantage  of  the  common  classes  of  consumers.  But 
it  is  obvious,  that  there  never  can  be  any  just  ground  for 
these  impressions,  except  in  those  cases  where  a  monopo- 
ly exists — that  is,  unless  where  some  one  engrosses  the 
trade  to  himself  to  the  exclusion  of  all  others.  Competi- 
tion will  ever  place  reasonable  limits  on  commercial  prof- 
its. No  matter  whether  it  respects  the  retail  trade,  or 
the  wholesale,  so  long  as  nothing  hinders  any  one  who 
pleases  from  engaging  in  the  business,  the  profits  made 
cannot  be  exorbitantly  high.  If  a  dealer  in  any  commo- 
dity asks  an  unreasonably  high  price  for  his  merchandise, 
others  engaged  in  the  business  will  undersell  him,  and 
thus  he  will  find  himself  obliged  to  lower  his  prices.  And 
if  he  has  monopolized  the  trade,  no  others  in  the  commu- 
nity being  employed  as  dealers  in  the  same  commodities, 
this  will  soon  be  known,  and  the  lure  of  higher  profits  will 
lead  others  to  engage  in  the  same  business.  But  it  is  to 
be  remembered,  that  this  statement  is  made  on  the  sup- 
position, that  there  is  no  interference  on  the  part  of  the 
authorities  of  the  country,  or  from  any  source — no  privi- 
leged companies,  no  oppressive  restrictions.  Free,  fair, 
open  competition  will  always  secure  fair  prices. 

But  there  are  other  considerations,  which  relate  more 
particularly  to  the  retail  trade.  In  this  branch  of  com- 
merce, much  that  is  ordinarily  looked  upon  as  profits,  is 


180  POLITICAL  ECONOMY. 

in  fact  a  remuneration  for  labor.  This  is  obvious  in  the 
case  of  the  travelling  retailer.  In  other  instances,  where 
a  shop  and  other  conveniences  for  retailing  merchandise 
are  provided,  the  expenses  of  the  establishment,  if  not 
large  compared  with  what  is  thus  expended  in  other 
branches  of  production,  are  large  in  proportion  to  the 
amount  of  sales  effected.  Unless  then  the  rate  of  profits 
be  higher  in  proportion  to  the  amount  of  business  done, 
the  expenses  of  conducting  the  business  and  the  usual  rate 
of  profits,  will  not  be  obtained.  It  is  right  also,  that  con- 
sumers situated  unfavorably  to  a  market,  should  pay  for 
the  labor  and  expense  incurred  by  those,  who  bring  the 
commodities  they  need  into  their  immediate  neighbor- 
hood-. 

Wholesale  trade. 

The  wholesale  merchant,  who  is  usually  found  in  sea- 
ports and  large  cities,  stands  between  the  importer  and 
producer  on  the  one  side,  and  the  retailer  on  the  other. 
His  dealings  are  usually  large  in  amount,  requiring  a  large 
outlay  of  capital  to  be  vested  in  the  commodities  bought 
and  sold,  and  in  accommodations  for  conducting  his  busi- 
ness. Much  responsibility  and  constant  attention  are  also 
required  ;  the  state  of  the  market  must  be  narrowly  watch- 
ed and  those  supplies  furnished  which  it  requires.  The 
rate  of  profits  in  this  branch  of  commercial  production  is 
less  than  in  the  retail  trade  ;  but  the  lower  rate  is  com- 
pensated by  the  greater  amount  of  business  transacted,  on 
which  profits  are  received. 

Some  may  be  disposed  to  ask,  whether  therfe  be  econo- 
my in  this  part  of  the  commercial  arrangements  of  a  coun" 


COMMERCE. 


fm 


try  ?— whether  the  retailer  should  not  rather  look  directly 
to  the  producer  and  the  importer  for  his  supplies  ?  This 
in  part  is  done  by  the  retailer ;  and  there  is  nothing  to 
prevent  his  obtaining  merchandise  in  this  way  to  any  ex- 
tent he  may  find  advantageous.  Such  however  is  the  va- 
riety of  commodities  needed  to  meet  the  demands  of  his 
customers,  that  he  often  finds  it  for  his  interest  to  pay  a 
small  advance  on  their  price  to  the  wholesale  merchant, 
rather  than  subject  himself  to  the  trouble  and  expense  of 
collecting  his  supplies  from  different  sources.  Besides, 
by  the  wholesale  trade,  the  importer  and  the  home  pro- 
ducer, especially  the  large  manufacturer,  having  quick  re- 
turns for  their  products,  are  relieved  from  the  embarrass- 
ment and  delay,  which  might  otherwise  attend  their  dis- 
posal, and  thus  assistance  is  given  to  different  branches  of 
production. 

Another  important  service  is  also  rendered  by  the 
wholesale  trader  to  the  community.  When  from  over- 
trading, or  from  over-production,  or  from  any  cause,  there 
is  an  excess  of  a  commodity  in  the  market,  so  that  its 
price  becomes  reduced  to  the  cost  of  its  production,  or  be- 
low this  cost,  the  wholesale  merchant  comes  forward  and 
buys  up  this  excess  at  the  reduced  price,  and  thus  pre- 
vents greater  loss  on  the  part  of  the  producers  and  import- 
ers. What  is  thus  purchased  in  a  time  of  plenty  at  a  re- 
duced price,  is  kept  on  hand,  till  the  price  rises  to  its  usu- 
al rate,  or,  as  is  sometimes  the  case,  exceeds  it.  Thus 
the  merchant  is  indemnified  for  the  use  of  his  capital,  and 
for  the  trouble  and  risk  of  the  transaction.  At  the  same 
time  consumers  are  benefited  ;  for  the  price  of  the  article 
as  thus  furnished,  is  lower  than  it  otherwise  would  havei 
been,  since  a  deficiency  of  supply  and  a  high  price  are  al- 
16 


182  POLITICAL  ECONOMY. 

most  sure  to  follow  a  glut  of  the  market.  This  Is  calle 
the  trade  of  speculation,  and  though  well  founded  preju- 
dices sometimes  exist  against  such  as  are  called  specula- 
tors, as  the  term  is  used  to  denote  those  who  are  unwisely 
adventurous  and  who  often  involve  themselves  and  others 
in  ruin,  there  is  no  ground  for  these  prejudices,  when  the 
service  that  has  been  described  is  rendered  to  the  commu- 
nity. 

It  is  thus,  that  the  wholesale  merchant  stands  between 
the  fluctuations  of  the  market  and  the  manufacturing  and 
commercial  interests  of  a  country.  He  receives  the  first 
shock  produced  by  these  fluctuations,  and  if  the  impulse, 
though  sudden  and  violent,  soon  ceases  to  be  felt,  its  dis- 
turbing effects  do  not  extend  themselves  to  the  agricul- 
turist and  manufacturer.  These  important  branches  of 
production  are  permitted  to  go  on  undisturbed,  except  irij 
extraordinary  cases. 

Internal  or  domestic  trade. 

Internal  trade,  in  distinction  from  foreign  commerce,  in- 
cludes all  commercial  transactions  of  every  kind  carried 
on  between  the  difl?erent  members  and  the  different  seen 
tions  of  the  same  country,  whether  wholesale  or  retail. 
This  is  the  most  extended  meaning  of  the  term  and  the 
sense  in  which  1  here  use  it. 

Internal  trade,  as  thus  defined,  is  absolutely  essential 
to  the  prosperity  of  a  community.  It  opens  a  vent  for 
products,  without  which  production  cannot  be  conducted 
in  the  most,  profitable  and  successful  manner,  and  is  inti- 
mately connected  with  the  economical  arrangements  of  a 
nation.     Corresponding  to  the  utility  of  domestic  trade  is 


COMMERCE.  183 

ihe  amount  of  its  extent  in  every  country,  far  exceeding 
in  most  instances,  as  it  is  supposed,  that  of  foreign  com- 
merce. Hence  the  importance,  that  every  hindrance  to 
its  operations  should  be  removed,  and  those  measures 
adopted  which  may  promote  its  advancement.  In  this 
view  I  remark, 

1.  No  duties,  imposts,  or  taxes  in  any  form,  should  be 
laid  on  the  operations  of  domestic  trade. 

In  some  countries  a  tax,  or  per  centage,  is  paid  to  the 
civil  or  ecclesiastical  authorities  on  all  transfers  of  real  es- 
tate. In  other  instances,  large  sums  are  collected  under 
the  name  of  licenses.  Some  European  nations  collect  du- 
ties on  merchandise  passing  from  one  province  or  depart- 
ment to  another,  and  sometimes  duties  are  levied  by  city 
governments.  It  is  true,  in  all  these  cases  the  amount 
paid  as  duties,  or  taxes,  is  ultimately  paid  by  the  consum- 
ers, since  it  is  added  to  the  cost  of  production  as  the  com- 
modity enters  the  market.  Still,  as  prices  are  thus  raised, 
the  demand  for  commodities  decreases ;  and  thus  wher- 
ever taxes  of  the  form  specified  are  laid,  they  are  hindran- 
ces to  the  operations  of  internal  trade,  and  weights  resting 
upon  the  productive  energies  of  a  country.  They  ought 
therefore  to  be  removed.  Buonaparte  is  said  to  have 
rendered  important  aid  to  internal  trade  during  his  reign, 
by  abolishing  the  system  of  frontier  duties,  which  previous- 
ly existed  among  the  European  nations,  and  which  has 
since  been  restored. 

2.  There  should  exist  in  every  nation  a  convenient  and 
safe  currency  as  a  medium  of  exchange. 

The  interests  of  internal  trade  require,  that  the  circulat- 
ing medium  of  a  country  should  admit  of  the  safe  and  easy 
transmission  of  values  in  the  form  of  money  from  one  sec- 


184  POLITI€AL  ECONOMY. 

tion  to  another,  however  remote.  It  is  also  important, 
with  reference  to  the  same  object,  that  the  currency,  so  far 
as  is  practicable,  sliould  be  of  uniform  value ;  but  when 
the  national  territory  is  extensive,  and  many  local  banks 
are  established,  this  desirable  object  cannot  perhaps  be 
fully  effected. 

But  it  is  of  still  higher  importance,  that  the  currency 
should  be  sound.  Whatever  precautionary  or  supervisa- 
tory  measures  can  be  taken  by  the  government  of  a  coun- 
try to  secure  this  result^  should  be  adopted.  The  break- 
ing of  a  bank  whose  notes  are  in  extensive  circulation, 
causes  much  embarrassment  and  many  vexatious  losses 
through  the  community.  It  does  much  also  to  impair 
confidence  in  this  part  of  the  national  currency,  especially 
among  the  more  numerous  and  less  intelligent  portion  of 
the  community,  and  thus  often  a  check  is  given  to  its  busi- 
ness transactions.  The  counterfeiting  of  money,  when 
practised  to  a  great  extent,  produces  similar  results.  But 
as  money  is  the  subject  of  a  distinct  chapter,  it  is  not  ne- 
cessary further  to  enlarge  upon  this  topic. 

3.  Facilities  should  be  furnished  for  the  transportation 
of  commodities. 

Facilities  for  the  transportation  of  commodities,  which 
is  an  important  part  of  commercial  production,  may  bear- 
ranged  in  the  two  following  classes;  1.  The  means  of 
transportation,  as  ships,  steamboats,  wagons,  horses  and 
other  beasts  of  burden.  2.  Improvements  of  natural  ad- 
vantages for  transportation.  Such  are  harbors,  break- 
waters, docks,  roads,  railways,  canals  he.  In  a  country 
where  such  facilities  are  found,  a  highly  favorable  influ- 
ence will  be  exerted  on  the  interests  of  internal  trade. 
Commodities  in  common  use  are  brought  into  the  vicinity 


COMMERCE.  185 

of  consumers,  and  are  offered  at  such  prices  that  most  are 
able  to  purchase  them,  and  thus  the  market  is  extended 
and  the  demand  enlarged. 

For  improvements  in  the  means  of  transportation,  a 
community  is  generally  indebted  to  the  ingenuity  of  indi- 
viduals. The  present  century  furnishes  many  striking  ex- 
amples. Fulton's  application  of  steam-power  to  naviga- 
tion, has  already  been  mentioned.  Others  have  exercis- 
ed their  inventive  powers  in  the  modelling  of  ships  and  in 
the  construction  of  carriages  and  railway  cars.  Improve- 
ments of  this  kind  are  of  the  same  nature  as  labor-saving 
machines,  and  the  same  encouragement  and  protection 
should  be  extended  to  them,  as  to  inventions  in  other  de- 
partments of  production. 

Improvements  of  the  other  class  are  generally  made 
under  the  direction  and  at  the  expense  of  the  public  au- 
thorities, excepting  those  instances,  which  from  their  na- 
ture allow  of  remuneration  to  individuals,  or  joint-stock 
companies,  in  the  form  of  tolls,  or  duties  of  some  kind. 
And  since  many  of  these  works  of  internal  improvement 
are  attended  with  a  large  expenditure,  and  the  benefits 
arising  from  them  are  not  limited  to  any  single  portion  of 
the  community,  it  seems  right,  that  a  part  of  the  public 
revenues  should  be  directed  into  this  channel. 

4.  A  well  sustained  system  of  credit  should  be  estab- 
lished. 

In  a  large  proportion  of  the  commercial  transactions 
constantly  occurring  in  every  trading  community,  some 
time  intervenes  between  the  purchase  of  an  article  and 
the  payment  for  it.  The  individual  consumer  who  re- 
ceives from  the  retailer  a  supply  of  groceries  and  other  ar- 
ticles consumed  in  his  family,  makes  payments  at  stated 
16* 


186  POLITICAL    ECONOMY. 

limes,  every  three  or  six  months,  as  may  be  the  custom, 
or  as  may  have  been  agreed  upon.  So  again  the  retailer 
receives  his  goods  from  the  wholesale  merchant  on  a  like 
term  of  credit,  as  it  is  called.  And  perhaps,  though  this 
is  not  so  commonly  the  case,  the  wholesale  merchant  has 
himself  obtained  his  supplies  from  the  producer,  or  im- 
porter, on  credit ;  and  thus  the  system  of  credit  extends 
itself  through  every  class  of  a  trading  community.  In- 
deed the  existence  of  this  system  in  one  class,  to  some 
degree  creates  a  necessity  for  its  introduction  into  others. 

This  system  of  credit  is  to  be  looked  upon  as  simply  a 
loan  of  capital.  The  seller  consents  to  wait  three  or  six 
months  for  payment  of  the  price  of  a  commodity,  which 
he  delivers  over  to  the  buyer.  He  thus  advances  to  him 
for  the  time  specified,  capital  to  the  value  of  the  article 
sold,  taking  care  to  indemnify  himself  by  a  higher  price, 
in  which  form  he  receives  interest  on  his  capital  thus 
advanced. 

The  conveniences  and  advantages  of  this  system  of  cred- 
it are  the  following  ;  1 .  It  saves  the  necessity  of  keeping 
on  hand  an  amount  of  funds  required  to  meet  the  daily 
expenses  of  a  family,  or  of  a  productive  establishment  of 
any  kind,  and  thus  it  economises  capital.  2.  It  is  a  con- 
venient mode  of  loaning.  What  is  thus  loaned  is  in  quan- 
tity and  kind  adapted  to  the  wants  of  the  borrower,  and 
is  in  that  form,  in  which  it  can  be  most  easily  furnished  by 
the  lender. 

To  balance  these  advantages,  it  is  said,  that  by  means 
of  this  system  of  credit,  many  are  tempted  to  injudicious 
expenditures  and  enterprises,  thus  exposing  themselves 
and  others  to  losses  and  embarrassment.  Indeed  to  this 
source  are  traced  much  of  the  over-trading  and  over-pro- 


COMMERCE.  I8t 

duction,  which  result  in  the  derangement  of  the  market, 
and  not  unfrequently  lead  to  failures  and  bankruptcies  and 
their  attendant  evils.  Upon  the  whole,  however,  the  sys- 
tem of  credit  must  be  regarded  as  highly  advantageous  to 
domestic  trade  ;  especially  is  this  the  case,  when  it  is  ju- 
diciously employed,  and  the  debts  thus  contracted  are  en- 
gagements entered  into  in  good  faith.  Whatever  then 
tends  to  establish  and  secure  a  system  of  credit,  is  favora- 
ble to  the  interests  of  domestic  trade.  And  there  are  two 
ways,  in  which  this  end  may  be  promoted.  1.  By  legal 
enactments  which  assist  in  the  collection  of  debts.  2.  By 
supporting  a  high  standard  of  moral  obligation  in  the  com- 
munity. When  the  aid  of  law  and  of  conscience  are  thus 
both  brought  in  support  of  commercial  credit,  few  instan- 
ces of  loss  will  occur,  and  those  from  providential  and  un- 
avoidable causes. 

Foreign  trade. 

A  brief  statement  of  the  nature  of  Foreign  Trade  and 
of  the  basis  on  which  it  rests,  was  made  in  the  chapter 
on  Economical  iVrrangements.  Further  views  on  the  same 
topics  are  found  in  connexion  with  the  following  exhibi- 
tion of  the  advantages  resulting  from  this  source. 

1.  Foreign  trade  increases  the  variety  of  national  sup- 
plies. 

As  the  result  of  the  economical  arrangements  and  pro- 
ductive enterprise  and  effort  which  are  found  in  nations 
of  civilization  and  wealth,  a  large  amount  of  commodities 
is  produced,  to  be  distributed  among  the  individual  pro^ 
ducers  and  other  members  of  the  community.  Of  this 
gross    amount  of   products,  foreign  commerce    takes  a 


188  POLITICAL  ECONOMY. 

portion  and  carries  it  abroad  to  other  nations,  receiving 
for  it  in  exchange  the  products  of  foreign  soils  and  climes. 
And  then,  when  this  substitution  of  these  foreign  com- 
modities for  domestic  ones  has  been  made,  the  gross 
amount  of  supplies  is  distributed  to  the  different  classes  of 
the  community.  Thus  the  variety  of  commodities  found 
in  the  nation  becomes  greater,  and  each  individual  is  ena- 
bled to  obtain  on  the  most  favorable  terms  and  with  little 
trouble,  whatever  his  convenience  and  comfort  and  even 
his  fancy  may  ask.  Look  at  the  table,  the  dress,  and 
the  furniture  of  even  the  common  laborer,  and  how  many 
articles  are  found,  which  are  the  products  of  foreign  and 
distant  countries  !  And  when  we  enter  the  mansions  of 
the  rich,  how  much  greater  still  is  the  proportion  of  these 
foreign  products !  For  all  this  variety  in  the  comforts 
and  conveniences  and  luxuries  of  life,  a  nation  is  indebted 
to  foreign  commerce. 

2.  It  increases  the  amount  of  national  supplies. 

This  consequence  results  from  foreign  commerce  as  an 
important  branch  of  national  production,  giving  employ- 
ment to  a  large  amount  of  labor  and  capital.  The  out- 
lay is  in  this  case  in  the  amount  vested  in  merchandise 
exported,  and  in  the  expenses  of  transportation  of  home 
products  to  foreign  markets,  and  then  again  in  the  pur- 
chase of  foreign  commodities  and  the  expenses  of  the  re- 
turn voyage.  And  it  is  at  the  conclusion  of  the  whole 
adventure,  that  we  are  to  find  its  results  in  the  excess  of 
importations  over  exportations.  This  excess,  in  whatever 
form  it  may  appear,  constitutes  the  avails  of  commercial 
production — the  returns  of  the  labor  and  capital  employed 
in  this  branch  of  national  industry,  and  is  an  important 
addition  to  the  amount  of  national  supplies. 


COMMERCE. 


189 


But  perhaps  these  returns  of  commercial  production 
are  in  the  form  of  money,  and  it  may  be  asked,  whether 
in  this  case  the  preceding  statement  will  hold  correct?  I 
answer,  that  if  the  merchant  brings  back  the  profits  of  his 
adventure  in  the  form  of  money,  it  is  because  he  finds  it 
for  his  advantage  so  to  do,  that  is,  because  this  commodi- 
ty is  in  higher  demand  at  home,  than  other  commodities 
found  in  the  foreign  market.  Money  as  an  article  of 
trade,  does  not  differ  from  other  commodities.  There  is 
then  in  this  case  an  addition  made  to  the  amount  of  na- 
tional supplies,  and  in  the  form  most  needed  by  the  na- 
tion. 

Perhaps  it  will  be  said  again,  that  the  expenses  of 
commercial  production  are  an  offset  to  all  the  increase  of 
value  effected  by  it,  and  that  no  addition  is  made  to  the 
amount  of  national  supplies.  Suppose  this  statement  to 
be  correct,  and  that  importation  returns  to  the  country  no 
more  than  had  been  sent  abroad.  Still  as  support  is  giv- 
en to  the  large  number  employed  in  this  branch  of  national 
industry,  and  interest  paid  on  the  capital  thus  invested,  it 
is  by  no  means  unproductive.  The  same  argument  ap- 
plies here,  as  was  used  when  considering  the  system  of 
the  Economists.  It  is  allowed  that  the  gross  amount  of  na- 
tional products  is  increased,  and  it  is  to  this  gross  amount, 
and  not  to  the  net  products,  that  we  look.  But  it  is  evi- 
dent, that  more  than  this  is  effected.  If  it  be  not  so,  why 
are  capital  and  labor  directed  to  commerce,  when  by  em- 
ploying them  in  agriculture,  or  manufactures,  a  return  is 
not  only  received  for  the  outlay,  but  the  profits  of  the 
undertaking  are  added. 

3.  Foreign  commerce  exerts  a  highly  stimulating  influ- 
ence on  national  production. 


190 


POLITICAL  ECONOMY. 


In  support  of  this  statement,  a  reference  might  be  made 
to  what  was  witnessed  in  Europe  during  the  fifteenth  and 
sixteenth  centuries — especially  to  the  effects  which  fol- 
lowed the  discovery  of  America,  and  of  the  passage  round 
the  Cape  of  Good  Hope.  But  historical  facts  on  this 
subject  are  well  known  and  have  been  often  adduced.  I 
shall  therefore  only  offer  a  brief  explanation  of  them. 

It  has  been  stated,  that  foreign  commerce  increases  both 
the  variety  and  amount  of  national  products.  It  brings 
within  the  reach  of  every  industrious  individual,  a  liberal 
supply  of  those  commodities,  which,  but  for  their  com- 
monness, would  be  ranked  among  the  luxuries  of  life. 
In  this  way  the  style  of  living  is  raised  and  the  number  of 
human  wants  increased,  and  then  to  gratify  this  higher 
sense  of  enjoyment  and  these  enlarged  desires,  more  ex- 
ertion must  be  made.  Every  consumer,  who  is  at  the 
same  time  a  producer,  feels  a  new  stimulus  to  increase 
the  amount  of  his  own  products,  and  thus,  without  doubt, 
large  additions  are  made  to  the  gross  amount  of  national 
supplies. 

But  there  is  another  way,  in  which  this  stimulating  in- 
fluence of  foreign  commerce  is  exerted.  The  facilities 
for  transportation,  and  for  effecting  exchanges,  thus  afford- 
ed, bring  the  different  nations  of  the  earth  into  neighbor- 
hood with  each  other ;  and  hence  producers  both  in  agricul- 
ture and  manufactures,  especially  in  the  latter,  make  their 
calculations  and  arrangements,  not  only  for  the  supply  of 
their  own  country,  but  of  other  communities.  Large  in- 
vestments are  made  in  fixtures  of  various  kinds,  in  ma- 
chinery and  other  productive  forms,  and  in  many  depart- 
ments division  of  labor  is  carried  to  a  minute  extent. 
The  consequences  which  follow,  have  been  already  stated. 


COMMERCE.  191 

The  amount  of  products  is  increased — their  price  is  dimin- 
ished, and  the  effects  of  this  diminution  are  seen  in  the 
enlarged  demand,  both  for  home  consumption  and  for  for- 
eign markets.  And  by  tracing  still  further  the  results 
which  follow,  which  has  been  done  in  another  place,  it  is 
seen,  that  the  stimulating  effects  of  foreign  commerce  ex- 
tend themselves  to  every  department  of  production. 

4.  Foreign  commerce  leads  to  the  full  developement  of 
an  important  class  of  territorial  advantages. 

The  territorial  advantages  here  referred  to,  are  materials 
used  in  the  building  of  ships — timber,  iron,  hemp  &c.  but 
more  especially  an  extended  sea  coast  with  commodious 
bays  and  harbors.  Some  use  will  be  made  of  these  ad- 
vantages in  domestic  trade,  but  the  more  full  develope- 
ment of  them  is  seen  only  in  those  countries,  which  are 
extensively  engaged  in  foreign  commerce.  The  com- 
mercial policy  of  the  Chinese  Empire  at  the  present 
time,  contrasted  with  that  of  most  European  nations,  es- 
pecially of  England,  is  an  example  of  the  loss  sustained 
by  the  neglect  of  this  class  of  territorial  advantages. 

5.  Foreign  commerce  offers  a  convenient  mode  of  col- 
lecting a  public  revenue. 

Many  expenditures  of  the  national  government  in  com- 
mercial countries,  are  made  for  the  support  and  protection 
of  foreign  commerce.  In  this  list  may  be  enumerated  the 
building  and  outfits  of  national  vessels — the  erecting  and 
support  of  light-houses  on  the  coast — the  salaries  of  those 
sent  as  ambassadors  to  foreign  countries  and  other  inci- 
dental expenses.  Hence,  there  seems  to  be  a  propriety 
in  collecting  the  revenue,  out  of  which  these  expenses 
are  to  be  met,  from  the  same  department  of  production. 
But  it  is  here  more  particularly  designed  to  bring  to  view 


192  POLITICAL    ECaNOMY. 

the  facilities  offered  in  connexion  with  foreign  commerce, 
for  the  apportionment  and  collection  of  a  national  reve- 
nue. By  a  wisely  adjusted  tariff  system,  high  duties  are 
laid  on  foreign  luxuries  brought  into  the  country,  while 
on  commodities  which  constitute  the  more  necessary  arti- 
cles of  life,  no  duties  are  imposed,  or  those  which  are 
light.  Hence,  since  in  all  cases  duties  are  added  to  the 
price  of  the  articles  consumed,  and  of  course  paid  by  the 
consumers,  the  rich  who  make  use  of  foreign  luxuries,  will 
be  made  to  contribute  largely  in  defraying  the  national 
expenses,  leaving  but  a  small  part  of  the  burden  to  be 
borne  by  the  poorer  classes  of  society.  In  this  way,  then, 
without  the  trouble  of  an  apprisal,  a  tax  is  laid  on  proper- 
ty, and  it  may  also  be  collected  with  less  expense  and 
trouble,  than  attend  other  forms  of  taxation.  Perhaps 
the  same  results  might  be  attained  by  some  other  meth- 
od, but  the  facilities  thus  offered  for  apportioning  and  col- 
lecting a  national  revenue,  are  highly  important. 

6.  Foreign  commerce  offers  a  convenient  mode  of  as-^ 
sisting  in  the   introduction  of  a  new  branch  of  domestic 
production. 

There  are  two  ways  in  which  this  assistance  is  given, 
— by  the  imposition  of  restrictive  duties,  and  by  the 
granting  of  bounties.  When  the  duty  laid  upon  any 
commodity  of  foreign  production,  is  so  high,  that  the  im- 
porter cannot  afford  to  pay  it  and  offer  the  commodity  for 
the  price,  at  which  it  is  furnished  by  the  domestic  produ- 
cer, the  duty  thus  imposed  becomes  restrictive.  Or  in- 
stead of  imposing  a  restrictive  duty  on  the  foreign  com-; 
modity,  an  allowance,  or  premium,  is  paid  by  the  govern- 
ment of  the  country  to  the  home  producer,  thus  enabling 
him  to  sell  his  products,  both  in  the  domestic  market  and 


COMMERCE.  193 

in  foreign  markets,  at  a  lower  price,  than  that  of  the  for- 
eign commodity.  In  this  case,  a  bounty  is  said  to  be 
paid,  and  it  is  at  once  seen,  that  the  effect  on  domestic 
production  is  the  same,  whether  resti'ictive  duties  are  im- 
posed, or  bounties  given. 

The  commercial  policy  which  is  usually  called  the  re- 
strictive system,  is  made  the  subject  of  a  distinct  chapter. 
I  shall  therefore  strictly  limit  the  view  here  given,  to  the 
proposition  which  has  been  stated  ;  and  in  relation  to 
this,  two  inquiries  arise  ;  1.  What  is  the  nature  of  the  as- 
sistance thus  given?  2.  What  is  the  nature  of  the  in- 
stances, in  which  it  may  with  propriety  be  extended  ? 

The  attempt  to  introduce  a  new  branch  of  production 
into  a  country,  is  an  experiment,  which,  if  successful, 
will  be  a  source  of  benefits  to  the  community  at  large. 
It  is  reasonable  then,  that  the  expense  and  risk  of  the 
experiment  should  be  borne  by  the  community.  And 
this  is  the  result,  which  is  effected  by  the  imposition  of 
restrictive  duties  and  by  bounties.  If  a  bounty  is  paid,  it 
is  paid  from  the  public  revenue,  which  in  some  form  of 
taxation  has  been  collected  from  the  individual  members 
of  the  community.  H  restrictive  duties  are  imposed,  the 
amount  of  this  duty  is  added  to  the  price  of  the  article, 
advancing  its  price  beyond  the  rate  at  which  it  could  oth- 
erwise have  been  afforded.  These  duties  then  are  a  tax 
on  all  consumers  of  the  commodities  on  which  they  are 
laid,  and  as  the  commodities  on  which  duties  are  thus 
paid,  are  usually  articles  of  general  consumption,  the  bur- 
den, as  before,  comes  upon  the  community  at  large.  It 
will  also  be  the  case,  that  the  benefits  of  the  experiment, 
if  successful,  will  eventually  accrue  to  those,  by  whom 
bounties  and  restrictive  duties  have  been  paid.  For  when 
17 


194  POLITICAL    ECONOMY. 

the  new  branch  of  production,  thus  introduced,  become^ 
estabHshed,  it  may  be  expected,  that  the  products  suppli- 
ed will  be  furnished  at  a  lower  price,  than  that,  at  which 
foreign  products  of  the  same  kind  had  previously  been 
sold.  From  this  statement,  then,  we  learn  the  nature  of 
restrictive  duties  and  bounties. 

Let  us  now  direct  our  attention  to  the  other  inquiry 
proposed — the  nature  of  the  instances,  in  which  this  as- 
sistance may  be  extended.  And  here,  I  would  refer  to 
what  has  already  been  said  on  the  order,  in  which  the  dif- 
ferent branches  of  production  naturally  spring  up  in  a  coun- 
try, first  those  of  an  agricultural  kind,  and  afterwards  of  a 
manufacturing  and  commercial.  We  have  seen,  that  the 
time  will  arrive  in  the  progress  of  every  nation,  when  the 
developement  of  its  territorial  advantages,  and  the  profita- 
ble employment  of  its  capital  and  industry,  with  other  fa- 
voring circumstances,  may  require  the  introduction  of  new 
branches  of  production.  Whenever,  then,  in  respect  to 
any  branch  of  production  not  existing  in  the  country,  it 
is  supposed,  that  this  time  has  arrived,  the  attempt  to  in- 
troduce it  should  be  made.  And  if,  as  will  generally  be 
the  case  when  competition  with  other  nations  is  to  be 
met,  this  attempt  may  be  attended  with  much  expense, 
and  be  doubtful  in  its  issue,  but  of  general  benefit  to  the 
community  if  successful,  it  is  manifestly  incumbent  on  the 
government  of  the  country,  to  defray  in  some  form  from 
the  public  revenues,  the  charges  of  the  experiment.  And 
unless  the  attempt  be  prematurely  and  unwisely  made, 
the  branch  of  production  thus  introduced,  will  soon  be 
able  to  sustain  itself  and  prove  advantageous  to  the  pub- 
lic. Here  then,  it  may  be  added,  that  if,  after  an  experi- 
ment of  this  kind  has  been  fairly  made,  it  is  found,  that 


ON  THE  RESTRICTIVE  SYSTEM.  195 

foreign  products,  burdened  as  they  are  with  the  cost  of 
transportation  and  other  incidental  charges,  can  be  afford- 
ed at  a  lower  price,  than  those  of  home  production,  there 
is  no  reason,  why  the  public  should  continue  to  be  sub- 
jected to  duties  or  bounties,  for  the  support  of  this  branch 
of  domestic  production. 

That  a  branch  of  production  may  be  introduced  in  the 
manner  that  has  been  stated,  and  in  the  end  prove  highly 
advantageous,  is  seen  in  the  history  of  the  manufacture  of 
cotton  fabrics  in  this  country. 


CHAPTER  XI. 
On  the  restrictive  system. 


In  the  history  of  Political  Economy,  different  schools 
are  found,  attaching  undue  importance  to  each  of  the  three 
great  divisions  of  human  industry.  The  doctrines  of  the 
Economists,  who  advocated  the  superiority  of  Agriculture, 
have  been  stated.  A  theory  of  earlier  date,  was  that 
which  bore  the  name  of  the  Mercantile  System.  The 
basis  of  this  system  was  the  now  exploded  doctrine,  that 
national  wealth  consists  in  money  ;  and  the  leading  object 
which  it  proposed,  was  by  commercial  regulations  to  se- 
cure an  increase  of  wealth,  as  thus  defined.  Hence,  for 
many  years  the  struggle  among  nations  adopting  this  theo- 
ry, was  to  secure  what,  by  the  supporters  of  this  system, 
was  denominated  a  favorable  balance  of  trade.  The 
meaning  of  this  phrase  and  the  reasoning  on  which  this 
policy  rests,  may  be  learnt  from  the  following  statement ; 


196  POLITICAL    ECONOMY. 

When  the  exports  of  a  country  exceed  its  imports,  the 
balance  will  be  received  in  money  ;  and  as  money  con- 
stitutes the  wealth  of  a  nation,  the  balance  of  trade  will  in 
this  case  be  favorable.  On  the  contrary,  if  the  imports 
exceed  the  exports,  this  excess  can  have  been  obtained 
only  in  exchange  for  money  sent  abroad  ;  in  this  case 
then,  it  was  supposed  that  the  national  wealth  was  dimin- 
ished, and  the  balance  of  trade  was  said  to  be  unfavorable. 

It  is  not  a  little  singular,  that  this  theory,  once  so  ge- 
nerally adopted,  and  forming  the  basis  of  the  commercial 
policy  of  the  most  powerful  nations  of  the  earth,  is  in  di- 
rect opposition  to  facts  and  correct  principles. 

The  other  system  to  which  reference  has  been  made, 
was  called  the  Manufacturing  System.  It  had  its  origin 
in  the  state  of  society,  and  in  the  institutions  of  the  feudal 
governments  of  Europe.  In  those  troubled  times,  when 
the  power  of  princes  was  often  unsuccessfully  resisted  by 
the  greater  barons,  the  former,  with  the  design  of  strength- 
ening their  cause,  endeavored  to  conciliate  the  favor  of 
the  towns  and  cities  which  had  sprung  up  in  the  country, 
and  which  were  engaged  in  manufactures.  Hence  spe- 
cial privileges  were  granted  to  those  towns  and  cities,  per- 
taining to  the  branches  of  industry  in  which  they  were  em- 
ployed. The  exportation  of  raw  materials  used  in  the 
manufactures  established  in  the  country,  and  also  of  bread- 
stuff needed  for  the  support  of  those  thus  employed,  was 
forbidden  on  heavy  penalties,  and  at  the  same  time  abso- 
lute prohibitions,  or  heavy  duties,  were  laid  on  foreign 
manufactured  products,  to  prevent  their  importation  from 
abroad.  This  was  called  encouraging  domestic  industry, 
and  other  regulations  relating  to  the  same  object,  were 
adopted. 


ON  THE  RESTRICTIVE  SYSTEM.  197 

Such  was  the  origin  of  the  Manufacturing  System,  which 
was  found  to  accord  well,  in  the  measures  adopted  for  its 
support  and  furtherance,  with  the  Mercantile.  The  same 
regulations, — the  same  restrictions  and  prohibitions,  which 
were  supposed  to  be  advantageous  in  securing  a  favorable 
balance  of  trade,  were  also  thought  to  afford  the  desired 
protection  to  domestic  industry.  Hence  the  two  systems 
became  blended  together,  and  for  many  years  the  correct- 
ness of  the  principles  on  which  they  were  founded,  was 
unquestioned.* 

The  remains  of  these  once  celebrated  systems  of  Polit- 
ical Economy,  have  come  down  to  us  in  these  later  times 
under  the  form  of  tariff  regulations,  constituting  what  is 
usually  called  the  restrictive  system.  And  here  we  ap- 
proach the  much  agitated  question,  how  far  it  is  expedient 
that  a  system  of  this  kind  should  form  the  basis  of  nation- 
al policy.  On  this  question,  which  has  divided  public 
opinion  in  this  country,  a  few  simple  propositions  will  now 
be  advanced.  This,  it  is  conceived,  is  all  that  is  requir- 
ed in  an  Elementary  work  on  the  science  of  Political 
Economy. 

A  restrictive  system  when  fully  adopted  by  any  nation, 
is  designed  to  effect  the  following  results ; 

1.  To  prevent  the  importation  of  foreign  manufactures 
into  the  country. 

2.  To  secure  for  its  own  manufactures  a  command  of 
foreign  markets. 

3.  '  To  prevent  the  exportation  of  raw  materials,  used 
in  those  branches  of  manufacture  which  have  become  es- 
tablished. 

*For  a  more  full  account  of  these  systems  I  refer  to  Smith's 
Wealth  of  Nations,  Book  4. 


I9S  POLITICAL  ECONOMY. 

4.  To  encourage  the  importation  of  the  same  raw  ma- 
terials from  abroad. 

These  results  it  seeks  to  effect  in  the  following  ways ; 

1.  By  direct  prohibitions.  By  direct  prohibitions,  are 
.meant  laws  relating  to  exports  and  imports,  with  heavy 
penalties  attached  to  their  violation. 

2.  By  prohibitory  duties.  Suppose  that  broadcloth  of 
a  certain  quality  can  be  manufactured  in  England  and  sold 
in  this  country  for  five  dollars  per  yard,  while  cloth  of  the 
same  quality  manufactured  here,  cannot  be  afforded  under 
6ve  dollars  and  a  half.  But  to  prevent  the  importation 
of  this  cloth,  and  thus  give  encouragement  to  domestic  in- 
dustry, a  duty  of  seventy  five  cents  per  yard  is  imposed. 
In  this  way,  then,  the  duty  becomes  prohibitory  in  its  na- 
ture ;  for  foreign  manufacturers,  when  compelled  to  pay 
this  duty,  can  no  longer  compete  with  our  own  manufac- 
turers of  the  same  class, — they  cannot  pay  this  duty,  and 
sell  their  broadcloth  for  what  it  can  be  furnished  in  this 
country. 

3.  By  pecuniary  bounties.  Suppose  this  same  broad- 
cloth to  be  sent  to  the  markets  of  South  America.  Cloth 
of  the  same  quahty  manufactured  in  England,  is  sold  there 
for  five  dollars,  but  the  manufacturer  in  this  country  can- 
not afford  it  under  five  dollars  and  a  half.  To  counter- 
balance this  advantage  on  the  part  of  the  English  produc- 
er, the  Government  of  the  United  States  pays  a  bounty 
of  seventy  five  cents  per  yard  on  broadcloths  of  this  quali- 
ty exported  from  the  country.  Thus,  then,  the  Ameri- 
can manufacturer  is  enabled  to  undersell  the  English,  and 
obtain  command  of  the  foreign  markets.  This  is  an  in- 
stance of  a  pecuniary  bounty. 

4.    By  drawbaclcs.    A  drawback  is  a  tariff  regulation, 


ON  THE  RESTRICTIVE  SYSTEM.  199 

by  which  the  duties  paid  on  any  article  are  under  certain 
circumstances  paid  back,  or  excepted.  Suppose  a  duty  of 
two  and  a  half  cents  a  pound  to  be  laid  on  common  brown 
sugar,  to  be  repaid,  or  not  required,  on  the  sugar  subject- 
ed to  the  refining  process  of  manufacturing  into  loaf  sugar. 
This  would  be  an  example  of  a  drawback. 

From  this  concise  statement,  the  objects  of  a  restrictive 
system  and  the  methods  adapted  to  effect  these  objects, 
may  be  learnt.     I  remark  then, 

1.  That  so  far  as  a  restrictive  system  is  designed  to  ef- 
fect a  favorable  balance  of  trade,  it  is  based  on  erroneous 
principles. 

It  can  hardly  be  necessary  to  offer  any  arguments  in 
support  of  this  proposition.  The  notion  of  a  favorable 
balance  of  trade,  is  fully  refuted  by  the  generally  received 
doctrines  on  the  nature  of  money  and  of  the  operations 
of  foreign  commerce,  found  in  works  on  the  science  of 
Political  Economy  at  the  present  day.  Still,  it  is  unques- 
tionably the  case,  that  some  nations  are  partially  acting 
upon  this  doctrine,  either  from  long  established  prejudices 
upon  the  subject,  or  from  the  difficulty  of  effecting  altera- 
tions in  what  has  become  a  part  of  a  settled  national  pol- 
icy. 

2.  So  far  as  a  restrictive  system  is  designed  to  give 
special  encouragement  and  support  to  any  branch  of  pro- 
duction, as  more  profitable  or  more  necessary  to  a  country, 
than  other  branches,  it  rests  on  erroneous  principles. 

It  is  a  favorite  opinion  with  some,  that  certain  modes 
of  employing  capital  and  labor  are  more  profitable  than 
others,  or,  at  least,  that  there  are  some  branches  of  pro- 
duction, which  give  more  full  and  constant  employment 
to  capital  and  labor  than  others.     Hence  they  are  jealous 


200  POLITICAL    ECONOMY. 

of  a  course  of  trade,  or  any  policy,  which  may  give  sup- 
port to  these  branches  of  production  in  foreign  countries, 
and  are  desirous,  that  the  government  of  their  own  coun- 
try may  adopt  such  measures,  as  shall  secure  to  its  own 
citizens  a  monopoly  of  these  more  profitable  modes  of  pro- 
duction. Perhaps  also,  these  opinions  are  strengthened 
by  the  impression,  that  the  products  of  these  same  branch^ 
es  are  specially  important,  because  of  the  urgent  wants 
which  they  supply,  or  as  they  render  a  nation  less  de- 
pendent on  other  nations. 

It  will  readily  occur,  that  these  opinions  are  in  direct 
opposition  to  the  explanation  given  of  the  nature  of  pro- 
duction in  the  first  chapter  of  this  work, — to  the  princi- 
ples laid  down  on  the  subject  of  exchange  in  the  chapter 
on  Economical  Arrangements,  and  also  to  what  has  been 
said  on  the  manner,  in  which  capital  and  labor  are  direct- 
ed to  different  employments.  Indeed  they  are  opposed, 
to  most  of  the  doctrines  which  have  been  advanced,  an(F 
it  might  be  sufficient  to  make  some  general  references  of 
this  kind,  to  shew  that  they  are  regarded  as  erroneous. 
But  besides  this  general  reference,  I  shall  endeavor  to 
shew,  by  a  brief  statement  of  the  opposite  policy,  that  the 
course  thus  recommended,  is  not  only  unwise,  but  illiberal 
and  narrow-minded. 

Let  us  then  first  suppose  a  nation  to  be  insulated — cut 
off  from  all  intercourse  with  foreign  nations,  and  depend- 
ent entirely  on  its  own  resources  for  the  supply  of  its 
wants.  The  order  in  which  the  different  branches  of  pro- 
duction would  be  introduced,  and  become  established  and 
enlarge  themselves,  has  already  been  stated.  The  first 
efforts  would  no  doubt  be  of  an  agricultural  nature,  accom- 
panied with  rude  and  simple  attempts  of  a  manufacturing 


ON  THE  RESTRICTIVE  SYSTEM.  201 

kind.  At  a  later  period,  domestic  commerce,  and  manu- 
factures with  its  extended  division  of  labor  and  its  various 
forms  of  machinery,  would  be  found,  each  advancing  with 
the  increase  in  the  abundance  and  variety  of  national  pro- 
ducts. In  some  instances,  where  experiments  relating  to 
the  introduction  of  a  new  branch  of  production  might  be 
attended  with  risk  as  to  success,  or  with  unusual  expense, 
and  in  which  the  advantages  resulting  would  be  of  general 
benefit  to  the  community,  aid  in  some  form  might  be  ex- 
tended from  the  public  revenues,  under  the  direction  of 
the  national  government.  But  with  these  few  exceptions, 
the  productive  energies  of  the  country  would  be  permitted 
to  develope  themselves,  unaided,  and  in  those  forms,  which 
the  wants  of  the  community  might  require.  Each  section 
would  adapt  itself  to  particular  branches  of  industry,  to  an 
extent,  and  in  a  manner,  most  conducive  to  its  own  wel- 
fare and  to  the  general  good,  free  from  all  animosities  and 
jealousies.  Those  portions,  which  from  the  superior  fer- 
tility of  their  soil,  or  other  favoring  circumstances,  might 
be  best  adapted  to  agricultural  production,  would  thus  em- 
ploy the  larger  portion  of  their  capital  and  labor.  Other 
parts  of  the  country,  would  for  the  same  reason,  and  in 
like  manner,  become  manufacturing  sections,  and  others 
again,  commercial.  Such  would  be  a  brief  outline  of  the 
economical  arrangements  and  progress  of  a  community,  in- 
sulated and  dependent  entirely  on  its  own  resources  ;  and 
the  happy  results  would  be  seen  in  the  harmony  of  action, 
and  the  general  prosperity  of  the  whole  nation  ;  each  sec- 
tion contributing  that  aid,  which  it  might  be  best  fitted  to 
furnish,  and  participating  by  mutual  intercourse,  in  the  pe- 
culiar advantages  for  production  possessed  by  others. 
And  now,  why  may  not  the  same  principles  and  the 


202  POLITICAL    ECONOMY. 

same  policy,  be  applied  with  equally  salutary  results  to 
the  community  of  nations  ?  The  diversities  as  to  territo- 
rial advantages  and  other  productive  resources,  which  ex- 
ist in  different  sections  of  the  same  country,  are  found  in 
different  nations,  and  to  a  more  marked  extent.  One  na- 
tion possesses  peculiar  advantages  for  agricultural  produc- 
tion, another  for  manufacturing,  and  a  third  for  commer- 
cial. Why  then  should  not  these  peculiar  advantages  be 
turned  to  the  best  account  by  each  ?  It  is  not  here  meant, 
that  a  nation  should  limit  its  productive  efforts  to  one  branch, 
entirely  excluding  or  neglecting  others.  This  would  be 
impracticable,  or  attended  with  much  inconvenience  in 
respect  to  different  sections  of  the  same  country,  and 
much  more  so,  if  attempted  by  different  nations.  All 
that  is  meant,  is,  that  the  larger  share  of  the  capital  and 
labor  of  a  nation,  should  be  directed  to  those  branches  of 
production,  in  which,  from  territorial  advantages,  or  other 
favoring  circumstances,  it  is  fitted  to  excel.  Neither  in 
this,  case,  any  more  than  in  the  former,  ought  the  attempt, 
which  may  be  made  to  introduce  a  new  branch  of  produc- 
tion, to  be  regarded  with  jealous  feelings  and  opposed. 
If  in  the  progress  of  a  nation,  the  time  has  arrived,  when 
its  resources  and  circumstances  require,  and  justify,  the 
introduction  of  any  branch  of  production,  not  before  exist- 
ing, the  attempt  to  introduce  it,  should  be  made.  In  this 
case,  there  will  be  competition  between  different  nations, 
as  there  will  between  different  sections  of  the  same  coun- 
try, but  it  should  be  open,  fair,  and  generous. 

The  policy  now  described,  will  at  once  be  recognised,  as 
that  which  has  received  the  name  of  the  free  trade  system, 
as  opposed  to  the  restrictive  system,  which  forms  the  sub- 
ject of  our  present  enquiries.  And  there  can  be  no  doubt, 


ON  THE  RESTRICTIVE  SYSTEM.  203 

that  were  this  system  fully  adopted  by  the  nations  of  the 
earth,  the  peace  and  happiness  and  prosperity  of  the  human 
race  would  be  promoted.  Many  jealousies  and  animosi- 
ties, which  now  exist,  would  cease  to  be  felt,  and  a  fruit- 
ful source  of  wars  and  contentions  would  be  removed.  It 
would  seem  too  that  the  very  object,  which  the  support- 
ers of  the  opposite  system  propose  to  attain,  would  be  se- 
cured, since  the  most  profitable  modes  of  employing  cap- 
ital and  labor  would  be  found.  For  what  more  advanta- 
geous course  can  be  adopted,  than  that  each  nation  should 
engage  largely  in  those  branches  of  production,  to  which 
its  territorial  advantages  and  other  circumstances  are  best 
adapted. 

Some  perhaps  will  object  to  the  system  of  free  trade, 
that  a  nation  thus  becomes  too  dependent  upon  others, — 
that  in  the  case  of  the  breaking  out  of  a  war,  or  of  any 
event,  which  might  hinder  or  prevent  the  intercourse 
between  nations,  serious  inconveniences  and  evils  would 
arise.  In  answer,  it  may  be  said,  that  the  exclusive  at- 
tention of  any  nation  is  not  supposed  to  be  given  to  any 
one  branch  of  production  to  the  neglect  of  others.  It 
must  always  and  necessarily  be  the  case,  that  a  large  pro- 
portion of  the  products  consumed  by  a  nation,  must  be  fur- 
nished within  its  own  limits.  Especially  is  this  true  of 
most  products  of  general  consumption  and  primary  impor- 
tance. Hence,  then,  though  in  the  case  supposed  incon- 
veniences might  arise,  the  consequences  would  not  be  so 
serious  as  is  feared.  There  is  also  another  view  to  be 
taken  of  this  subject.  Were  the  free  trade  system  gener- 
ally adopted  by  nations,  as  the  basis  of  their  commercial  / 
intercourse,  it  would  present  one  of  the  most  effectual  ^ 
checks  to  wars,  that  could  be  desired.     For  it  would  then 


204  POLITICAL  ECONOMY. 

be  seen  and  felt,  that  no  nation  can  engage  in  war,  with- 
out cutting  the  sinews  of  its  own  strength,  and  bringing  up- 
on itself,  as  well  as  upon  its  enemy,  the  most  serious  losses 
and  privations.  Instead  then  of  an  objection  to  the  free 
trade  system,  there  is  here  found  a  strong  argument  in  its 
favor.  (M-  C^H^A^  I- 

But  others  object  to  the  free  trade  system,  that  it  is 
opposed  to  the  generally  received  maxims  of  state  policy, 
and  that  its  adoption  would  require  an  entire  revolution  in 
the  principles  and  modes  of  intercourse  among  nations. 
Allowing  the  correctness  of  this  inference,  it  is  evidently 
no  argument  against  the  system  itself.  A  statement  of 
this  kind  may  shew,  that  a  change  of  commercial  policy 
might  be  attended  with  many  difficulties,  and  should  be 
made  gradually,  and  with  great  caution,  and  this  is  all 
that  it  proves.  To  bring  it  forward  against  the  system  it- 
self, would  be  to  beg  the  question,  for  the  very  point  at 
issue  is,  whether  the  generally  received  maxims  of  state 
policy,  and  the  course  of  measures  based  upon  them,  be 
not  selfish,  narrowminded  and  injurious  to  the  general 
good — such  as  should  be  discarded.  But  it  may  be  the 
case,  that  the  free  trade  system  is  not  opposed  to  the 
soundest  maxims  of  state  policy,  as  is  sometimes  supposed. 
It  may  be  but  another,  and  a  more  distinct  and  sure  way, 
of  securing  the  most  important  of  those  results,  which  are 
the  aim  of  those  who  oppose  it.  Indeed,  the  two  systems 
difier  from  each  other,  not  in  respect  to  the  end  which  is 
to  be  attained,  but  in  the  measures  proposed  for  its  attain- 
ment. The  restrictive  system  is  based  on  the  doctrine, 
that  the  prosperity  of  a  nation  is  to  be  promoted,  by  se- 
curing for  it  special  privileges  and  advantages  to  the  dis- 
paragement of  other  nations.      On  the  contrary,  the  free 


ON  THE  RESTRICTIVE   SYSTEM.  205 

trade  system  maintains,  that  all  nations  may  advance  to- 
gether prosperously,  and  that  the  welfare  of  each  will  be 
promoted  by  that  of  others.  Thus,  while  the  former  ad- 
dresses itself  to  the  selfish  principles  of  our  nature  only, 
the  latter  makes  its  appeals  both  to  the  benevolent  feelings, 
and  to  the  desire  felt  by  every  nation  for  its  own  advance- 
ment. 

But  perhaps  it  may  here  be  said,  that  the  propriety  of 
restrictive  measures  when  designed  to  assist  in  the  intro- 
duction of  a  new  branch  of  production,  has  been  admit- 
ted, and  that  the  same  measures  should  be  continued,  to 
give  support  and  encouragement  to  the  branches  of  pro- 
duction thus  established,  or  to  others  equally  important. 
To  meet  this  statement,  and  make  prominent  the  distinc- 
tion in  the  two  cases,  I  offer  a  third  proposition. 

3.  So  far  as  a  restrictive  system  is  designed  to  assist  in 
the  introduction  and  establishment  of  new  branches  of 
production,  which,  when  thus  introduced  and  established, 
are  advantageous  to  the  community, — or  so  far  as  it  affords 
protection  to  any  important  branch  of  production  ex- 
isting in  the  country,  against  the  attempts  of  foreign  coun- 
tries to  break  it  down  and  destroy  it, — or  so  far  as  it  gives 
support  to  a  branch  of  production  necessary  for  the  de- 
fence of  a  nation,  it  rests  on  sound  principles,  and  should 
be  adopted. 

This  proposition,  it  will  be  noticed,  consists  of  three 
distinct  parts,  which  are  exceptions  to  the  preceding  propo' 
sition.  These  exceptions,  one  of  which  has  already  been 
considered,  are  stated  together  in  this  manner,  because 
they  rest  on  the  same  general  principle  which  has  before 
been  partially  exhibited.  It  is  the  following  ;  All  re- 
strictive  duties,  bounties,  prohibitions  &c.  that  is,  all  the 
18 


aOS  POLITICAL    ECONOMr^ 

measures  of  the  restrictive  system,  are  to  be  looked  upon 
in  the  same  hght  as  taxes — burdens  imposed  upon  the  in- 
habitants of  a  country  for  the  pubhc  good.  That  such 
is  the  nature  of  these  measures  is  inferred  from  the  fact, 
that  they  are  attended  by  an  advance  in  the  price  of  com- 
modities, and  this  advance  is  an  indirect  tax  on  all  consum- 
ers. Here  then  it  is  proposed  to  apply  to  this  particular 
form  of  taxation,  the  same  inquiries,  as  arise  in  relation  to 
other  taxes.  Is  the  benefit  to  be  secured  such  as  to  jus- 
tify the  imposition  of  the  burden  ?  And  it  is  the  answer 
to  this  inquiry,  which  leads  to  the  distinction  between 
the  case  stated  in  the  second  proposition  and  the  excep- 
tions which  make  up  the  third.  The  distinction  is  as  fol- 
lows :  A  tax,  or  burden  in  the  form  of  restrictive  meas- 
ures, may  be  imposed  upon  the  public,  to  meet  the  ex- 
pense of  an  experiment  for  the  introduction  of  a  new 
branch  of  production,  or  of  affording  protection  to  a 
branch  already  existing  against  an  attempt  to  break  it 
down, — or  to  support  a  branch  essential  to  the  public 
defence,  because  in  each  of  these  cases,  the  public  will 
derive  a  benefit  as  an  offset  to  the  burden  imposed. 
But  a  tax,  or  burden  thus  imposed,  merely  to  give  sup- 
port or  encouragement  to  a  branch  of  production  afford- 
ing more  profitable  employment  to  capital  and  labor,  or  to 
secure  for  it  undue  advantages  in  foreign  markets,  is  not 
to  be  justified  from  any  advantages  which  are  thus  con- 
ferred upon  the  public.  It  may  prove  advantageous  to 
those  immediately  concerned  in  the  production  of  the  fa- 
vored  commodities,  but  the  consumers — the  nation  gen- 
erally, instead  of  deriving  any  ultimate  benefit,  will  be 
subjected  to  continued  losses. 

Let  us  now  look  more  particularly,    at  the  excep- 


THE    RESTRICTIVE    SYSTEM.  207 

dons  to  the  free  trade  system,  which  make  up  the  third 
proposition.  Of  the  first,  enough  has  already  been  said 
in  the  preceding  chapter.  In  respect  to  the  second  ex- 
ception, which  relates  to  protection  against  foreign  aggres- 
sions, it  may  also  be  shown,  that  the  interference  of  gov- 
ernment is  needed,  and  that  aid  thus  extended  will  in  the 
end  prove  advantageous  to  the  whole  community.  To 
justify  restrictive  measures  on  this  ground  however,  it  is 
important,  that  the  case  should  clearly  be  made  out,  to  be 
one  of  aggression.  If  it  be  merely  an  attempt  on  the 
part  of  the  foreign  nation  to  introduce  a  branch  of  produc- 
tion, w^hose  introduction  is  deemed  to  be  required  by  the 
circumstances  of  the  country,  it  should,  as  before  stated, 
be  met  only  by  fair  and  generous  competition.  Any 
thing  more  than  this,  is  itself  of  the  nature  of  aggression. 
But  that  there  are  instances,  in  which  it  is  the  settled  pur- 
pose of  one  country  to  break  down  a  branch  of  production 
in  another,  and  in  which  great  sacrifices  and  many  unfair 
practices  are  resorted  to,  for  the  accomplishment  of  this 
purpose,  cannot  be  doubted.  And  it  is  to  such  cases,  that 
the  second  part  of  the  proposition  is  designed  to  apply. 
It  is  true,  indeed,  that  the  losses  which  follow  successful 
attempts  of  this  nature,  will  fall  primarily  and  principally  on 
producers.  But  since  the  breaking  down  of  any  established 
branch  of  production,  which  is  furnishing  its  products  at 
the  lowest  rate  for  which  they  can  be  afforded,  will  in  the 
end,  when  foreign  producers  have  obtained  command  of 
the  market,  be  followed  by  an  advance  in  the  price  of  the 
same  products,  the  public  generally  are  interested  in  pre- 
venting this  result.  Instances  of  this  kind  then  come  un- 
<der  the  general  principle  that  has  been  stated. 

The  products  referred  to  in  the  remaining  part  of  our 


209  POLITICAL    ECONOMY. 

proposition,  are  those  articles  used  in  war,  with  which  it 
is  deemed  important,  that  every  nation  should  be  able  to 
furnish  itself  without  dependence  on  a  foreign  power. 
On  this  point,  there  is  no  difference  of  opinion  :  and  un- 
til the  time  shall  come,  when  the  necessity  of  making 
provision  for  national  defence  shall  cease,  such  branches 
of  production  may  be  protected  and  supported  from  their 
connexion  with  the  national  welfare. 


CHAPTER  XII, 


On  the  different  classes  of  Productive  Laborers. 

In  preceding  chapters,  the  attention  has  been  directed 
to  those  economical  arrangements  found  in  society,  which 
relate  to  production, — to  human  industry,  the  aids  of  na- 
ture and  capital,  the  three  agents  by  whose  productive  ser- 
vice the  great  w^ork  of  supplying  a  nation's  wants  and  in- 
creasing its  wealth  is  carried  forward, — and  also  to  each 
of  the  leading  departments  of  human  industry.  Agriculture, 
Manufactures  and  Commerce.  And  in  the  views  which 
have  been  taken  of  these  different  subjects,  I  have  been 
led  to  consider  them  for  the  most  part  as  connected  with 
the  interests  of  the  community.  It  is  proposed  in  this 
chapter,  to  look  at  some  of  the  employments  and  pursuits 
of  different  classes  of  productive  laborers  with  reference 
to  the  interests  of  the  trade,  or  profession,  and  of  the  indi- 
vidual laborer. 


PRODUCTIVE  LABORERS. 


Day  Laborers. 


209 


There  are  found  in  every  community  those  who  are  de- 
nominated day  laborers.  Such  are  not  usually  confined 
to  any  particular  department  of  labor,  but  their  employ- 
ments are  various.  They  are  assistants  to  others,  per- 
forming such  offices  as  may  either  directly  help  forward 
productive  processes,  or  indirectly  tend  to  this  result,  by 
enabling  those  employed  as  producers,  to  devote  their 
time  and  efforts  more  exclusively  to  their  w^ork.  Thus 
they  become  a  sort  of  disposable  force,  which  may  be  di- 
rected to  any  point,  where  there  is  need  of  additional  aid. 
There  are  times,  when  the  farmer  can  advantageously  em- 
ploy a  larger  number  of  laborers  than  usual, — it  is  haying 
season,  or  reaping  season,  and  the  favorable  time  will  soon 
be  past.  So  too  in  commercial  production,  there  may  be 
an  unusual  pressure  of  business — much  must  be  accom* 
plished  within  a  few  hours  or  days.  In  all  such  instan- 
ces, there  is  found  the  convenience  of  having  a  class  of 
men  in  the  community,  whose  labor  may  receive  any  re- 
quired direction,  and  who  from  the  length  of  time  for 
which  they  are  usually  engaged,  and  with  reference  to 
which  their  services  are  reckoned  and  paid,  are  called 
day  laborers. 

The  situation  of  the  day  laborer  is  usually  esteejned 
less  eligible,  than  that  of  any  other  class  in  the  communi- 
ty. His  remuneration  is  small,  often  affording  only  a  bare 
subsistence,  with  no  opportunity  of  making  accumulations 
and  rising  to  a  higher  condition  in  life.  But  the  principal 
disadvantage  to  which  he  is  subjected,  is  the  want  of  steady 
employment ;  this  circumstance,  to  him  who  is  dependent 
on  his  daily  labor  for  his  own  support,  and  perhaps  for  the 
18* 


210  POLITICAL    ECONOMY. 

supply  of  the  wants  of  his  family,  must  be  a  source  of 
much  inconvenience.  Not  unfrequently  also,  injurious 
effects,  arising  from  the  want  of  employment,  are  felt  by 
those,  who  are  left  to  spend  whole  days  without  occupa- 
tion. They  become  dispirited  and  indolent,  perhaps  in- 
temperate and  vicious. 

Tliat  in  every  populous  community  large  numbers  are 
found  in  the  class  of  day  laborers,  is  not  so  much  the  re- 
sult of  choice  on  the  part  of  laborers  themselves,  as  of  ne- 
cessity. Many  occupations  require  an  outlay  of  capital, 
beyond  the  ability  of  most  laborers  to  furnish,  and  in  some 
nations,  hindrances  arise  from  the  law  of  apprenticeships 
and  other  injurious  regulations.  But  a  few  simple  tools  > 
is  all  the  capital  the  day  laborer  is  expected  to  possess, 
and  even  these  are  sometimes  furnished  by  his  employers. 
The  work  performed  by  him,  is  also  usually  such  as  re- 
quires no  uncommon  skill,  or  knowledge,  to  execute  it 
successfully.  No  preparatory  training  is  required.  Even 
the  boy  is  enabled  to  turn  his  labor  to  account,  and  those 
whose  necessities  require  immediate  relief,  at  once  find 
occupation  and  remuneration  for  their  services, 

Of  the  Mechanic, 

It  is  often  enjoined  upon  parents,  whose  children  are  to 
be  dependent  on  their  own  labor  for  support,  that  they 
*'  put  their  sons  to  a  trade."  And  those  parents  who  have 
forethought,  and  whose  circumstances  will  allow  of  it,  are 
usually  ready  to  follow  this  advice.  A  statement  of  some 
of  the  reasons,  on  which  this  advice  is  founded,  will  bring 
to  view  the  comparative  advantages  of  this  species  of  la- 
bor« 


PRODUCTIVE  LABORERS.  211 

1.  In  this  way  the  years  of  boyhood  and  of  minority ^ 
are  turned  to  the  best  account.  The  apprentice  to  some 
mechanical  employment,  that  of  a  house  carpenter  for  ex- 
ample, is  necessarily,  while  learning  his  trade,  making  a(> 
quisitions,  which  in  after  years  are  sources  of  profit  to  him. 
For  when  as  a  journeyman,  or  a  masterworkman,  he  comes 
to  the  practice  of  his  art,  he  will  receive  a  remuneration 
for  the  knowledge  and  skill  which  he  possesses.  Thus 
the  acquisitions  of  his  early  years  become  to  him  of  the 
nature  of  capital,  and  he  enters  upon  active  Hfe  under 
more  favorable  circumstances,  than  he  whose  youth  has 
been  spent,  either  in  idleness,  or  in  the  employments  of 
common  day  labor. 

2.  He  who  practises  a  trade,  usually  finds  constant 
employment  and  receives  high  wages.  A  skilful  mechan- 
ic in  a  thriving  community,  rarely  wants  work  ;  if  he  can- 
not find  occupation  in  his  own  particular  department  of 
labor,  he  may  engage  in  some  kindred  art,  or  in  the  com- 
mon employments  of  day  labor.  Competition  will  also 
generally  secure  to  him  high  wages,  for  inversely  in  pro- 
portion to  the  difficulty  and  expense  of  acquiring  any  art, 
or  trade,  will  be  the  number  of  those  practising  it. 

3.  He  who  learns  a  trade  will  probably  acquire  habits 
of  industry.  Constancy  of  employment,  especially  in 
youth,  may  lead  to  this  result.  The  mechanic  also  feels 
a  peculiar  interest  in  his  work, — there  is  a  call  for  inge- 
nuity and  a  sense  of  reputation,  which  are  favorable  to  the 
formation  of  habits  of  industry. 

5.  The  prospect  of  advancement  is  before  the  mechan- 
ic. The  apprentice  becomes  a  journeyman,  and  if  he  is 
industrious,  skilful,  frugal  and  enterprising,  he  accumulates 
capital,  and  is  enabled  himself  to  undertake  and  conduct 


218  POLITICAL  ECONOMY. 

work  in  his  own  department.  He  becomes  a  master 
workman,  has  others  to  assist  him  as  apprentices  and 
journeymen,  and  thus  the  way  to  competency,  if  not  to 
wealth,  is  open  to  him. 


Of  the  Manufacturer. 

When  we  speak  of  the  manufacturing  laborer,  we  have 
in  view  those  employed  in  large  manufacturing  establish- 
ments, in  which  division  of  labor  and  the  free  use  of  ma- 
chinery have  been  extensively  introduced. 

This  branch  of  labor  recommends  itself  principally  by 
its  simplicity,  and  by  the  ease  with  which  it  is  performed. 
As  remarked  in  another  place,  it  is  often  the  mere  watch- 
ing and  waiting  upon  machinery,  which  itself  does  all 
the  work.  Hence  in  this  branch  of  industry  employment 
is  afforded  to  those  of  immature  age,  and  to  females,  and 
thus  the  manufacturer  not  only  receives  a  remuneration 
for  hia  own  labor,  but  for  that  of  the  different  members  of 
his  family,  for  whose  support  he  is  bound  to  provide. 

Full  and  constant  employment  is  also  usually  furnished 
to  the  manufacturer.  The  outlay  of  capital  in  manufac- 
turing establishments  is  generally  large,  and  it  is  the  in- 
terest of  those  on  whose  account  the  business  is  conduct- 
ed, that  the  different  processes  should  be  rapidly  execu- 
ted, and  succeed  each  other  without  delay.  Hence,  in 
these  establishments,  the  laborer  is  employed  as  many 
hours  and  as  constantly,  as  he  can  endure  to  labor. 
'  The  rewards  of  manufacturing  labor  are  also  generally 
higher,  than  are  received  by  the  same  laborers  in  other 
departments  of  industry.  The  child  earns  a  small  amount, 
who  would  not  probably  in  any  other  way  earn  any  thing. 


PRODUCTIVE  LABORERS.  213 

The  female  earns  much  more,  than  she  could  otherwise 
obtain,  and  as  the  remuneration  of  the  manufacturer  is 
generally  dependent  on  the  amount  of  work  done,  the 
skilful  and  industrious  often  acc^uire  more  than  the  average 
rate  of  wages. 

But  while  some  advantages  are  found  in  this  depart- 
ment of  labor,  there  is  no  one,  against  which  stronger  ob- 
jections have  been  urged  ;  hence  these  objections  require 
a  distinct  consideration. 

1.  It  is  said,  that  the  manufacturer  is  more  dependent 
on  his  employers,  than  other  laborers.  In  the  minute  ex- 
tent of  division  to  which  manufacturing  labor  is  carried, 
the  individual  laborer  is  limited  to  the  fractional  part  of  a 
process  of  production.  All  the  skill  and  knowledge  which 
he  possesses,  extend  to  this  single  process,  and  his  efforts 
are  of  avail  only  in  connexion  with  others.  When  sepa- 
rated from  his  fellow  laborers,  "  he  is  a  mere  adjective, 
without  individual  capacity,  independence,  or  substantive 
importance."  Thus,  it  is  said,  the  manufacturer  is  com- 
pletely in  the  power  of  his  employers.  They  may  reduce 
his  wages,  or  require  him  to  work  more  hours  in  the  day, 
or  impose  upon  him  in  any  manner  they  see  fit,  and  he 
has  before  him  the  alternative  of  submitting  to  these  im- 
positions or  of  being  deprived  of  that  employment,  to 
which  alone  from  his  previous  habits  and  acquirements  he 
is  fitted. 

It  must  be  acknowledged,  that  in  those  countries,  where 
the  laboring  population  is  large,  and  where  employment  is 
found  with  difficulty,  especially  where  injurious  regulations 
exist  pertaining  to  freedom  of  trades  and  apprenticeships, 
there  will  be  some  ground  for  this  objection  to  manufac- 
turing labor.     Even  here,  however,  the  power  of  th^ 


214  POLITICAL    ECONOMY. 

master-manufacturer,  or  undertaker,  over  those  employed 
by  him,  is  not  so  great  as  it  is  often  supposed  to  be.  So 
excessive  is  the  extent  to  which  competition  is  carried  in 
tlie  manufacturing  establishments  of  these  countries,  and 
so  important  is  it  from  the  large  amount  of  capital  employ- 
ed, that  the  operations  of  these  establishments  should  go 
forward  without  interruption,  that  employers  are  almost  as 
much  dependent  on  laborers,  as  the  latter  upon  the  for- 
mer. 

In  our  own  country,  or  in  any  country  where  there  is  a 
demand  for  labor  in  its  different  departments,  and  where  a 
laborer  is  permitted  to  change  his  occupation,  as  may  suit 
his  convenience  or  pleasure,  this  objection  to  manufactur- 
ing labor  is  little  felt. 

2.  A  second  objection  brought  against  manufacturing 
labor,  is,  that  it  is  injurious  in  its  effects  on  the  mental 
habits  and  capabilities.  It  is  said,  that  when  a  laborer  is 
thus  confined  to  one  operation,  which  is  repeated  inces- 
santly and  with  no  variation,  he  becomes  a  mere  machine, 
or  rather  the  part  of  a  machine.  His  mental  powers,  be- 
ing left  unoccupied,  become  torpid  and  enfeebled  by  inac- 
tion. Being  also  employed  in  this  manner  from  early 
childhood,  and  enjoying  no  opportunities  for  acquiring 
knowledge,  he  becomes  profoundly  ignorant,  and  sinks 
low  on  the  scale  of  intellectual  being. 

To  the  objection  as  thus  stated,  it  is  replied,  that  the 
evil  effects  enumerated,  are  not  necessary  consequences 
of  being  employed  in  manufacturing  labor.  They  result 
rather  from  the  extent,  to  which  competition  is  carried  in 
this  department  of  production.  Every  master- manufac- 
turer is  endeavoring  to  bring  his  products  to  the  market 
at  a  lower  cost  of  production  than  others.     It  is  for  this 


t 


PRODUCTIVE  LABORERS.  215 

end,  that  children  of  an  immature  age  are  kept  employ- 
ed many  hours  in  the  day,  to  the  injury  both  of  their 
health  and  of  their  education.  It  is  on  this  account,  also, 
that,  through  his  whole  life,  the  manufacturing  laborer  is 
pushed  to  a  degree  of  effort  and  a  constancy  of  employ- 
ment, which  leave  him  no  time  for  the  cultivation  of  his 
mind,  and  which  are  in  other  respects  injurious  to  him. 
The  objection  then,  that  has  been  stated,  is  to  be  urged 
against  the  extent,  to  which  competition  is  carried  in  man- 
ufacturing production,  and  not  against  the  department  of 
labor  itself. 

And  further,  in  respect  to  the  mind's  being  narrowed 
and  enfeebled  by  being  engaged  in  one  simple  manufac- 
turing operation,  it  is  said,  that  it  can  make  no  difference 
as  to  the  mental  culture  and  habits  of  the  laborer,  wheth- 
er the  part  of  the  work  performed  by  him  consist  of  one 
simple  act,  incessantly  repeated,  or  of  two,  or  even  three, 
simple  acts  thus  repeated.  In  neither  case  is  there  a  ten- 
dency to  enlarge  and  strengthen  the  mind.  It  may  also 
be  added,  that  the  more  simple  the  task  to  be  performed, 
and  the  more  mechanical  the  manner  in  which  it  is  exe- 
cuted, the  greater  will  be  the  amount  of  leisure  afforded, 
and  the  better  the  opportunity  for  profitable  and  improv- 
ing reflection. 

3.  Another  objection  brought  against  the  situation  of 
the  manufacturing  laborer,  is,  that  it  is  unfavorable  to 
health  and  to  morals.  It  is  said,  that  the  labor  performed 
by  the  manufacturer  is  in  many  cases  injurious,  cramping 
the  body,  and  not  giving  ft  free  and  healthy  exercise  to  its 
different  powers.  Sometimes  there  is  exposure  to  noxious 
gasses,  to  wet,  and  to  unwholesome  degrees  of  tempera- 
ture.    The  state  of  the  atmosphere  in  these  establish- 


216  POLITICAL    ECONOMY. 

ments  is  also  not  unfrequently  unhealthy,  the  apartments 
of  the  laborers  being  crowded  and  badly  ventilated.  It  is 
also  said,  that  where  large  numbers  are  thus  collected  to- 
gether, some  of  whom  are  corrupt  in  principle  and  in  con- 
duct, a  bad  moral  influence  is  exerted.  To  support  both 
these  positions,  appeals  are  made  to  facts.  It  is  asserted, 
that  of  manufacturing  laborers,  a  large  proportion  are  sick- 
ly and  short-lived,  and  that  many  are  immoral. 

That  there  is  some  validity  in  these  objections  to  man- 
ufacturing labor,  is  generally  allowed.  At  the  same  time 
however,  it  is  maintained,  that  they  exist  in  respect  to 
other  employments,  besides  manufactures.  All  kinds  of 
labor  requiring  sedentary  habits,  are  injurious  to  most  con- 
stitutions, especially  if  pursued  with  great  constancy  and 
effort.  There  are  also  in  other  employments  exposures 
to  noxious  gasses,  to  unfavorable  temperatures  and  atmos- 
pheres, but  in  all  instances  of  this  kind,  the  risk  incurred, 
is  to  be  recompensed  by  a  higher  rate  of  wages.  As  to 
the  frequent  instances  of  sickness  and  mortality  referred 
to,  it  should  be  remembered,  that  where  population  is 
condensed,  such  cases  are  more  generally  known  and  re- 
marked upon. 

To  the  other  part  of  the  objection  we  are  considering, 
which  relates  to  the  immoral  influences  connected  with 
manufacturing  establishments,  it  is  replied,  that  such  influ- 
ences are  by  no  means  necessarily  attendant  on  the  con- 
dition of  the  manufacturer.  And  if  he  is  so  situated  as  to 
be  peculiarly  exposed  to  temptations,  which  may  lead  liim 
astray,  influences  of  an  opposite  nature  may  also  be  brought 
to  bear  upon  him  with  much  effect ;  for  where  a  popula- 
tion is  condensed,  they  are  in  favorable  circumstances  to 
receive  moral  and  religious  instruction.     As  to  the  fre- 


PRODUCTIVE  LABORERS.  217 

quency,  with  which  instances  of  immorality  occur,  in  a 
crowded  manufacturing  population,  the  same  remark  may 
be  made,  as  was  suggested  respecting  cases  of  sickness 
and  death.  We  have  the  impression,  that  they  are  fre- 
quent, because  they  occur  within  a  very  limited  extent, 
and  all  come  under  our  immediate  observation. 

In  considering  the  replies,  which  have  now  been  made 
to  the  objections  brought  against  manufacturing  labor,  it 
will  be  noticed,  that  though  they  in  some  measure  obviate 
these  objections,  they  do  not  fully  remove  them.  It  may 
be  true,  that  many  of  the  unfavorable  influences,  both 
moral  and  physical,  to  which  the  manufacturing  laborer  is 
exposed,  are  not  necessarily  and  in  their  nature  connected 
with  this  form  of  human  industry,  yet  if  they  are  wont  to 
attend  upon  it — if  there  is  a  strong  tendency  to  that  ex- 
cessive competition,  from  which  it  is  allowed  many  of  the 
evils,  which  have  been  referred  to,  result,  there  is  reason, 
why  those  who  engage  as  laborers  in  this  branch  of  indus- 
try, should  guard  against  the  temptations  to  which  they 
are  exposed,  and  why  those  appointed  to  watch  over  the 
welfare  of  the  community,  should  adopt  such  measures  on 
this  subject  as  the  public  safety  requires. 

Of  the  Farmer. 

In  this  country,  the  farmer  is  usually  the  owner  of  the 
soil  which  he  cultivates,  at  least  of  the  capital  used  in  con- 
ducting his  farm,  and  often  of  both.  He  works  himself, 
employing  others  to  assist  him  who  are  hired  by  the  day, 
the  week,  or  the  month,  as  circumstances  may  render 
convenient.  I  propose  then,  in  considering  the  interests 
of  the  agricultural  laborer,  to  look  at  the  farmer  himself, 
19 


218  POLITICAL  ECONOMY. 

viewing  him  not  so  much  in  his  capacity  of  landholder,  or 
capitalist,  as  in  that  of  laborer. 

And  here,  as  this  topic  is  one  of  common  remark,  it  is 
unnecessary  to  do  more,  than  make  a  simple  enumeration 
of  the  advantages  and  disadvantages,  pertaining  to  this 
branch  of  industry. 

1.  It  is  a  healthy  employment.  The  labors  of  the 
farm,  which  are  performed  for  the  most  part  in  the  open 
air,  seem  well  adapted  to  the  human  frame  and  the  hu- 
man constitution,  and  there  is  generally  more  of  health 
and  of  hardiness  in  this  class  of  laborers,  than  in  any  other. 

2.  It  is  a  pleasant  employment.  There  is  variety  in 
its  labors,  and  variety  is  always  grateful.  It  is  pleasant 
also  to  watch  the  progress  of  the  fruits  of  the  earth,  and 
to  assist  in  rearing  and  maturing  them.  It  is  permitted 
to  the  husbandman,  says  Cowley,  '^  to  see  all  his  gar- 
dens and  fields  covered  with  the  beauteous  creations  of  his 
own  industry  ;  and  to  see,  like  God,  that  all  his  works 
are  good." 

3.  It  is  a  moral  employment.  The  temptations  to  vi- 
cious indulgences,  which  offer  themselves  to  the  farmer, 
are  far  less  numerous  and  urgent,  than  those  which  assail 
laborers  in  most  other  occupations  of  life.  It  would  seem 
also,  that  he  whose  daily  labors  are  in  the  midst  of  the 
works  of  God,  and  who  receives  the  gifts  of  Providence 
direct  from  the  hands  of  the  Great  Giver  of  every  bles- 
sing, must  be  a  religious,  and  of  course  a  moral  man. 

4.  It  is  an  employment,  ivith  ivhich  respect  and  influ- 
ence are  associated.  Though  from  the  economical  ar- 
rangements of  society,  the  farmer  is  no  less  dependent  on 
other  classes  of  the  community  than  these  classes  are 
upon  him,  it  is  apparently  otherwise.     He  furnishes  the 


PRODUCTIVE  LABORERS.  219 

food,  with  which  himself  and  other  laborers  are  sustain- 
ed. He  furnishes  also  the  materials  of  manufacturing 
and  commercial  labor.  Thus  every  thing  seems  to  ori- 
ginate with  the  farmer,  and  hence  he  regards  his  employ- 
ment as  one  of  great  importance,  and  others  accord  to 
him  the  same  estimation. 

Of  the  objections  made  to  agricultural  labor,  none  are 
deserving  of  much  consideration.  It  is  sometimes  said, 
that  the  labor  of  the  farmer  is  hard  work,  and  that  there 
is  much  drudgery  attending  it.  Others  object  to  the 
lonesomeness  of  his  situation — that  there  is  little  oppor- 
tunity for  the  indulgence  of  the  social  feelings.  Others 
again  think  that  the  gains  of  the  farmer,  though  sure,  are 
too  slowly  made  ;  they  would  have  more  of  adventure  and 
excitement.  Of  these  and  similar  objections,  it  may  be 
said,  that  they  will  arise,  and  the  force  of  them  will  be 
felt,  according  to  the  characters  and  habits — the  modes 
of  thinking  and  feeling,  which  pertain  to  different  individ- 
uals. Hence  they  do  not  here  require  a  distinct  and 
separate  notice. 

Of  Commercial  Laborers. 

A  division  may  be  made  of  those  in  this  department  of 
production,  including  under  one  head  such  as  are  directly 
engaged  in  the  purchase  and  sale  of  commodities,  and 
under  the  other,  those  employed  in  the  subordinate  parts 
of  commercial  labor.  In  the  former  class,  are  to  be  rank* 
ed  the  retailer,  the  wholesale  merchant,  the  exporter  and 
importer.  In  the  latter,  are  included  clerks  and  those 
employed  in  the  transportation  of  goods,  as  porters,  dray- 
men, sailors  &c. 


230  POLITICAL    ECONOMY. 

There  is  much  in  commercial  pursuits  to  invite  the  at- 
tention of  those  who  are  entering  on  the  business  of  life. 
In  this  department  of  production,  the  love  of  adventure, 
which  is  so  deeply  fixed  in  the  human  breast,  is  gratified. 
Instances  are  not  unfrequently  occurring,  in  which  those 
who  have  started  in  life  with  small  beginnings,  become 
men  of  large  possessions  ;  and  in  the  anticipations  of 
youth,  many  are  ready  to  mark  out  for  themselves  a 
course  of  life  equally  successful.  The  employments  of 
the  merchant  are  also  exciting,  especially  as  connected 
with  the  rise  and  fall  of  prices  and  the  various  fluctuations 
of  the  market. 

But  while  many  considerations  allure  the  young  and 
enterprising  to  commercial  pursuits,  the  amount  of  capital 
which  is  needed,  tends  to  limit  the  number  of  those  who 
thus  employ  themselves.  Skill  and  tact  for  business  of 
this  kind,  and  in  some  cases  much  knowledge,  are  also  re- 
quired. Add  still  further,  the  risk  and  responsibility  in- 
curred, for  while  some  who  engage  in  commercial  pur- 
suits make  fortunes,  others  become  bankrupts. 

Of  those  who  perform  subordinate  offices  in  the  work 
of  commercial  production,  many  are  job  or  day  laborers, 
and  the  principles  before  stated  apply  to  them.  But 
there  is  one  class  of  these  subordinate  laborers — the  sailor 
— which  requires  a  distinct  consideration. 

There  are  other  inducements  besides  those  of  an  eco- 
nomical kind,  which  lead  many  to  encounter  the  hardships 
and  toils  of  a  sea-faring  life.  Curiosity  is  gratified  in  the 
opportunity  presented  of  visiting  different  countries ;  and 
perhaps  the  dangers  of  the  sea,  as  they  call  for  a  degree 
of  hardihood  and  daring,  are  for  these  reasons  more 
sought  for  by  the  young  and  adventurous.     Economically 


PRODUCTIVE  LABORERS.  221 

considered,  there  is  little  to  recommend  this  kind  of  em- 
ployment. The  remuneration  of  the  sailor  is  apparently 
liberal,  should  all  that  he  receives  be  looked  upon  in  the 
light  of  wages  ;  but  if  a  fair  deduction  be  made  for  the 
risks  that  he  runs,  and  also  for  the  injury  sustained  by  his 
constitution  from  the  fatigues  and  hardships,  to  which  in 
times  of  peril  and  difficulty  he  is  exposed,  the  amount 
left  as  wages  becomes  much  reduced.  Some  time  also 
must  be  spent,  and  many  risks  run,  in  acquiring  the 
knowledge  and  skill  of  the  accomplished  sailor.  On  the 
other  hand,  it  may  be  said,  that  though  the  labor  of  the 
sailor  is  at  times  difficult  and  severe,  it  is  not  so  unremit- 
ted, as  that  of  the  farmer  and  manufacturer.  There  is 
also  a  prospect  of  advancement  to  the  active  and  enter- 
prising seaman,  who  obtains  knowledge  and  skill  in  his 
employment,  and  whose  character  gives  a  title  to  confi- 
dence and  trust.  But  of  the  thousands  who  enter  on  this 
pursuit,  how  few  are  there  whose  course  is  successful ! 
How  large  a  proportion  are  either  swallowed  up  in  the 
deep,  or  fall  victims  to  the  temptations  that  assail  them ! 
The  efforts,  which  the  humane  and  benevolent  are  now 
making  to  improve  the  condition  of  the  sailor,  leading  him 
to  become  more  provident,  and  rescuing  him  from  the  vices 
to  which  he  is  peculiarly  exposed,  are  effecting  much  in 
making  the  situation  of  this  portion  of  the  community 
more  elisible. 


^ 


19* 


^ibrarif. 


_<v 


Omftrnl*. 


222 

CHAPTER  XIII. 

On  the  different  classes  of  Unproductive  Laborers. 

In  the  first  chapter  of  this  work,  I  have  pointed  out  the 
distinction  between  productive  and  unproductive  laborers, 
which,  as  there  remarked,  arises  from  the  definition  of  the 
term  production.  It  is  there  also  said,  that  unproductive  . 
laborers  constitute  a  highly  serviceable  and  important  por- 
tion of  the  community,  supplying  some  of  the  most  urgent 
wants  of  their  fellovvmen,and  indirectly  rendering  efficient 
aid  to  the  work  of  production  itself.  There  is  then  in  the 
term  unproductive,  as  thus  applied,  nothing  which  is  il- 
liberal, or  which  is  designed  in  any  way  to  disparage  those 
thus  denominated. 

In  treating  on  the  distribution  of  wealth,  there  will  be 
opportunity  for  shewing  in  what  manner  unproductive  la- 
borers derive  their  revenue,  receiving  in  return  for  the 
services  they  render,  a  portion  of  the  gross  amount  of  na- 
tional products.  I  propose  in  this  chapter,  to  offer  a  few 
general  remarks  on  the  nature  of  these  employments,  both 
as  they  are  connected  with  the  public  welfare  and  with 
the  interests  of  the  laborers  themselves. 

The  Physician, 

The  services  rendered  by  the  Physician  relate  to  the 
preservation  of  health  and  of  life ; — they  meet  a  class  of 
wants,  which  in  certain  conditions,  in  which  men  are 
sometimes  found,  and  in  which  they  are  ever  liable  to  be 
found,  become  urgent.  There  is  then  in  this  case,  as  in 
the  use  of  material  products,  the  redressing  of  a  want,  and 


UNPRODUCTIVE  LABORERS.  223 

the  Individual  to  whom  these  services  are  rendered,  finds 
his  welfare  and  enjoyment  essentially  promoted. 

The  labors  of  the  physician  also  indirectly  aid  in  the 
work  of  production.  The  sick  man  cannot  labor ;  his 
time  is  lost  both  to  himself  and  to  the  public.  He  then, 
by  whose  instrumertality  this  sickness  is  removed,  and 
the  productive  laborer  is  again  enabled  to  perform  his 
usual  task,  indirectly  assists  in  the  productive  efforts  of 
the  community.  Thus,  in  consequence  of  the  services  of 
the  physician,  more  work  is  done  and  a  greater  amount  of 
products  raised.  Hence,  some  have  called  physicians  and 
other  professional  men,  indirect  productive  laborers ;  and 
there  is  no  objection  to  this  phrase  with  the  accompanying 
explanation. 

And  here  I  may  be  permitted  to  suggest,  that  this  class 
of  unproductive,  or  indirect  productive  laborers,  might  be- 
come still  more  serviceable  to  the  public,  if  it  constituted 
a  part  of  their  duty,  to  give  directions  and  assistance  for 
the  preservation  of  health,  as  well  as  for  its  restoration 
when  lost.  Most  of  the  diseases  to  which  men  are  sub- 
ject, are  brought  upon  them  by  their  own  indiscretion  and 
ignorance  and  folly  ;  and  without  doubt,  much  might  be 
done  to  prevent  these  unhappy  results  by  the  instructions 
and  counsels  of  the  intelligent  and  skilful  physician,  whose 
business  it  is,  to  investigate  the  laws  of  the  human  system, 
and  to  apply  to  practical  purposes  the  knowledge  thus  ac- 
quired. 

There  are  many  inducements,  by  which  individuals  are 
led  to  engage  in  the  study  and  practice  of  the  healing  art. 
The  subjects,  to  which  the  attention  is  directed  in  a  course 
of  preparatory  studies,  embrace  some  of  the  most  interest- 
ing departments  of  natural  science,  offering  much  to  grati- 


2^  POLITICAL    ECONOMY. 

iy  curiosity  and  to  inform  and  improve  the  mind.  The 
practice  of  medicine  also,  though  sometimes  laborious,  and 
attended  with  harassing  cares  and  great  responsibilities, 
has  connected  with  it  much  that  is  grateful.  It  is  pleas- 
ant to  be  the  instrument  of  relieving  distress,  and  the  ob- 
ject of  confidence  and  respect  to  those  among  whom  we 
dwell ;  and  such  confidence  and  respect  rest  largely  on 
the  kind,  faithful,  and  skilful  physician.  The  average 
remuneration  of  the  services  of  the  physician  is  also  ample 
and  generous. 

The  Laioyer. 

Laws  are  enacted  by  civil  governments  for  the  security 
of  the  property  and  persons  of  their  subjects,  and  for  the 
defence  of  the  various  rights  which  belong  to  the  mem- 
bers of  social  communities.  But  laws  thus  enacted  are 
necessarily  general  in  their  nature,  and  their  application 
to  particular  cases  is  not  unfrequently  attended  with  doubt 
and  difficulty.  Hence  the  necessity  of  a  class  of  men  in 
the  community,  who  may  make  the  principles  of  law  and 
the  acts  and  statutes  of  legislative  power,  the  subjects  of 
their  special  attention  and  study,  and  thus  be  prepared  to 
give  counsel  and  assistance  in  the  application  of  these  prin- 
ciples and  statutes  to  the  transactions  and  events  daily  oc- 
curring. And  those  rendering  this  service  evidently  meet 
one  class  of  wants,  which  to  man  m  a  social  state,  are 
highly  important.  In  this  case  too,  as  in  that  of  the  phy- 
sician, indirect  assistance  is  furnished  towards  conducting 
the  productive  processes,  which  are  carried  forward  in  the 
community.  Without  the  services  rendered  by  the  law- 
yer, men  would  with  much  difficulty  associate  together  in 


UNPRODUCTIVE  LABORERS.  225 

combined  action  for  the  purposes  of  production,  some  fur- 
nishing capital,  others  natural  agency,  and  others  again  la- 
bor. Transfers  of  property  from  one  owner  to  another, 
would  also  be  less  easily  and  safely  made.  Hence  it  has 
been  said,  that  he  who  by  a  legal  instrument  makes  a  man 
secure  in  the  possession  of  the  field  which  he  cultivates, 
is  a  productive  laborer,  in  the  same  sense,  as  he  who  as- 
sists in  building  the  fence,  by  which  the  same  field  is  en- 
closed. And  it  must  be  acknowledged,  that  if  we  look  at 
the  end  to  be  attained,  these  acts  are  the  same  in  their  na- 
ture ;  but  since  the  result  of  labor  in  one  case  becomes 
permanent  in  a  material  object,  constituting  a  part  of  the 
wealth  both  of  the  individual  and  of  the  nation,  while  in 
the  other  case,  there  is  no  product  possessing  permanent 
value  created,  the  ground  of  distinction  before  pointed  out 
remains. 

The  study  of  the  profession  of  law  is  usually  accounted 
difficult  and  dry.  Much  however,  in  this  respect,  will 
depend  on  the  constitution  and  previous  habits  of  the 
mind.  To  some,  the  intellectual  efforts  it  demands,  and 
the  inquiries  to  which  it  leads,  are  peculiarly  grateful. 
But  the  practice  of  this  profession  is  esteemed  more  allur- 
ing, as  it  offers  much  to  awaken  interest  and  create  excite- 
ment. It  leads  also  to  competency  and  wealth  ;  for  while 
the  average  remuneration  of  legal  services  equals  that  of 
other  professional  laborers,  there  are  not  a  few  successful 
practitioners,  w^ho  acquire  large  estates.  The  profession 
also  opens  in  this  country  a  prospect  of  preferment  to  pla- 
ces of  public  honor  and  trust,  and  sometimes  of  profit. 


226  POLITICAL    ECONOMY. 


The  moral  and  religious  Teacher. 

It  was  remarked  in  the  introduction  to  this  work,  that 
man  has  other  wants,  than  those  pertaining  to  the  body. 
These  wants  arise  from  \m  nature,  and  from  the  relations 
he  sustains  to  the  beings  and  objects  around  him.  They 
relate  to  the  cultivation  of  his  moral  anxl  intellectual  pow- 
ers, to  the  enlargement  of  his  knowledge,  and  to  his  in- 
struction in  what  pertains  to  his  duties  and  obligations. 
Hence  there  are  classes  of  men  in  the  community,  whose 
employment  it  is  to  aid  in  the  disciplining  of  these  moral 
and  intellectual  powers,  and  in  leading  the  mind  to  the 
different  sources  of  knowledge  ;  and  it  is  one  of  these 
classes,  which  is  had  in  view,  when  we  speak  of  the  mor- 
al and  religious  teacher. 

Fully  to  appreciate  the  importance  of  the  services  ren- 
dered by  this  class  of  laborers,  it  would  be  necessary  to 
trace  their  bearing  on  the  whole  of  human  existence,  both 
in  this  life  and  in  that  which  is  to  come.  It  might  then 
be  seen,  that  the  individual,  whose  moral  and  religious  in- 
terests are  thus  provided  for,  derives  from  those  who  thus 
minister  to  this  class  of  his  wants,  the  highest  and  most 
important  benefits. 

But  Political  Economy  looks  on  this  class  of  laborers 
with  more  especial  reference  to  the  public  welfare  ;  and 
in  this  view  also,  the  service  rendered  and  the  influence 
exerted,  are  highly  salutary  and  important.  The  neces- 
sity of  good  laws  well  enforced,  that  the  economical  ar- 
rangements and  operations  of  a  community  may  exist  and 
be  prosperously  conducted,  has  been  remarked  upon  in 
another  place ;  and  it  may  be  added,  that  such  laws  owa 


UNPRODUCTIVE  LABORERS.  227 

their  adoption  and  enforcement  to  public  opinion.  A  law 
is  nothing  in  a  free  community,  if  not  thus  sustained. 
But  it  is  to  moral  and  religious  considerations,  and  to  those 
who  explain  and  enforce  them,  that  we  are  to  look  for 
that  influence,  which,  more  than  any  other,  forms  this  sal- 
utary public  opinion,  and  gives  to  it  its  weight  and  binding 
power.  Hence,  the  security  and  well  ordered  state  of  so- 
ciety, so  important  to  its  economical  interests,  are  in  no 
small  degree  to  be  ascribed  to  the  services  of  its  moral 
and  religious  teachers.  And  further,  that  men  may  be 
industrious  and  frugal,  submitting  to  toil  and  self  denial, 
they  need  to  be  urged  forward  and  sustained  by  motives 
of  great  power  and  unceasing  obligation  ;  and  such,  in  a 
peculiar  sense,  are  the  motives  adduced  by  the  moral  and 
religious  teacher.  Self  interest  offers  strong  stimulatives 
to  exertion,  but  when  a  sense  of  duty  comes  in  to  lend  its 
sanctions,  there  are  wont  to  be  more  equable,  and  con^ 
stant,  and  wisely  directed  efforts.  Thus,  then,  moral  and 
religious  teachers  become  indirect  assistants  in  the  work 
of  production,  and  it  may  be  said,  as  was  asserted  of  the 
physician  and  lawyer,  that  more  labor  is  performed,  and  a 
greater  amount  of  products  obtained  in  the  community, 
where  they  are  found,  than  would  otherwise  be  the  case. 
The  professional  studies  and  employments  of  the  moral 
and  religious  teacher,  to  him  whose  mind  is  deeply  imbu- 
ed with  moral  and  religious  truths,  are  highly  interesting 
and  grateful.  And  such  are  left  to  find  a  large  part  of 
the  reward  of  their  services,  in  the  satisfaction  and  peace 
of  mind  which  result  from  doing  good. 


228  POLITICAL    ECONOBIY. 


The  Literary  and  Scientific  Teacher. 

Another  class  of  professional  laborers  consists  of  those, 
who  conduct  the  business  of  education  in  its  different  de- 
partments, thus  increasing  the  enjoyments  and  usefulness 
of  individuals,  and  advancing  the  interests  of  the  commu- 
nity. By  the  services  of  those  thus  occupied,  the  way  is 
opened  to  a  distinct  class  of  enjoyments,  for  to  those  whose 
minds  have  been  expanded  and  strengthened  by  cultiva-- 
tion,  and  enriched  by  knowledge,  and  who  have  become 
men  of  refined  literary  taste,  there  are  pleasures,  with 
which  the  ignorant  and  uninstructed  intermeddle  not. 
The  literary  and  scientific  teacher  also  promotes  in  differ- 
ent ways,  the  economical  interests  of  a  community.  By 
his  assistance,  scientific  laborers,  who,  in  another  part  of 
this  work,  are  shewn  to  be  productively  employed,  when 
applying  the  principles  of  science  to  the  creating  and  per- 
fecting of  material  products,  are  qualified  for  their  work. 
It  is  his  office  also,  to  aid  in  preparing  the  different  classes 
of  professional  laborers  for  the  discharge  of  their  several 
duties.  And  further,  the  general  diffusion  of  intelligence, 
which  has  been  shewn  to  be  closely  connected  with  the 
prosperity  of  nations,  is  promoted  by  those,  who  thus  la- 
bor in  the  work  of  education. 

In  this  country,  the  services  rendered  by  the  literary 
and  scientific  teacher,  are  at  the  present  time  more  highly 
appreciated,  and  more  generously  rewarded,  than  at  for- 
mer periods.  Those  thus  employed,  are  looked  upon  as 
constituting  a  distinct  profession,  the  emoluments  of  which 
are  equal  to  those  of  other  professional  laborers, — a  rank 
and  a  remuneration,  to  w^hich,  whether  we  look  at  the 


UNPRODUCTIVE  LABORERS.  229 

nature  of  the  services  rendered,  or  at  the  bearing  of  these 
services  on  the  welfare  of  the  community,  they  seem  rich- 
ly entitled. 

Of  the  public  Functionary. 

Under  this  head,  are  included  all  who  in  any  way  are 
employed  in  the  administration  of  public  affairs,  whether 
as  legislators,  or  as  judicial,  or  as  executive  officers.  The 
term  also  extends  to  those,  whose  services,  both  by  sea 
and  land,  are  required  for  the  defence  of  a  country.  It  is 
the  business  of  the  public  functionary,  to  watch  over  the 
interests  and  conduct  the  concerns  of  civil  society.  Hence, 
as  the  security  and  happiness  of  a  nation  are  closely  con- 
nected with  its  civil  institutions,  and  with  the  enactment 
and  enforcement  of  wise  and  salutary  laws,  those  thus  em- 
ployed may  contribute  much  to  the  general  welfare,  and 
minister  to  an  important  class  of  human  wants.  And  fur- 
ther, as  the  existence  of  the  economical  arrangements,  and 
the  undertaking  and  success  of  the  productive  processes 
of  a  community,  are  closely  connected  with  the  institu- 
tions of  civil  society,  public  functionaries  become  indirect 
productive  assistants. 

But  here  it  is  important  to  remark,  that  the  number  of 
those  who  thus  do  service  for  the  public,  should  not  be 
unnecessarily  multiplied.  If  the  machinery  of  civil  so- 
ciety become  too  intricate,  or  be  needlessly  extended,  this 
kind  of  service  is  obtained  by  the  public  at  too  dear  a  rate. 
For  besides  what  is  directly  paid  as  a  remuneration  to  pub- 
lic officers,  a  larger  number,  than  is  necessary,  is  taken 
from  the  productive  classes  of  society  ;  and  thus,  while 
the  burden  of  supporting  public  functionaries  becomes 
20 


230  POLITICAL  ECONOMY. 

greater,  the  number  of  productive  laborers,  on  whom  this 
burden  rests,  is  diminished.  Probably  also,  the  civil  af- 
fairs of  the  community  are  less  judiciously  and  efficiently 
managed. 

The  emoluments  of  public  office  are  often  large,  in  pro- 
portion to  the  remuneration  of  other  services  of  a  similar 
nature,  and  as  stations  of  this  kind  are  places  of  trust  and 
of  power,  as  well  as  of  profit,  they  are  usually  sought  with 
much  eagerness.  This  is  especially  wont  to  be  the  case 
in  those  governments,  where,  either  in  theory  or  in  prac- 
tice, the  voice  which  decides  the  amount  of  remuneration 
to  be  received,  is  that  of  public  functionaries  themselves, 
often  with  no  check  on  the  part  of  those,  from  whom  the 
public  revenues  are  derived. 

Of  Domestic  Servants, 

There  remains  one  other  class  of  the  community,  who 
according  to  the  kind  of  labor  they  are  called  to  perform, 
may  be  denominated  productive,  or  unproductive  labor- 
ers. I  refer  to  domestic  servants,  some  of  whom  are  evi- 
dently employed  in  processes,  by  which  material  objects 
are  adapted  to  the  supply  of  human  wants,  while  the  ser- 
vices rendered  by  others  receive  a  different  direction. 
Thus  the  individual,  on  whom  devolves  the  culinary  pro- 
cesses of  a  domestic  establishment,  is  a  productive  laborer, 
while  the  coachman  and  lacquey  of  the  same  establish- 
ment, are  unproductive  laborers. 

Whether  productively  or  unproductively  employed,  do- 
mestic servants  constitute  a  highly  useful  class  of  the  com- 
munity, and  contribute  largely  to  the  comfort  and  happi- 
Oi^SS,  of  society.     To  some  extent,  also,  they  often  become 


UNPRODUCTIVE  LABORERS.  231 

indirect  assistants  in  production,  since  they  set  free  from 
many  cares  and  labors,  those  who  are  productively  en- 
gaged, and  who  are  thus  left  free  to  direct  all  their  time 
and  energies  to  their  own  appropriate  employments. 

The  traits  of  character,  which  in  this  class  of  laborers 
are  high  recommendations,  entitling  those  possessing  them 
to  confidence  and  a  generous  remuneration,  are  skill,  and 
honesty,  and  fidelity.  And  it  should  ever  be  remember- 
ed, that  kind  and  fair  treatment  on  the  part  of  those  em- 
ploying laborers  to  assist  them  in  their  domestic  arrange- 
ments and  processes,  will  ordinarily  be  met  with  activity 
and  faithfulness  on  the  part  of  those  employed.  A  good 
master  makes  a  good  servant. 


\ 


PART  II. 


DISTRIBUTION  AND  CONSUMPTION  OF  WEALTH. 


CHAPTER  I. 

Distribution  of  Wealth. 


The  prosperity  and  happiness  of  nations  are  not  always 
in  proportion  to  their  wealth.  In  some  communities, 
where  an  abundance  and  variety  of  products  are  found, 
this  supply  is  in  the  hands  of  a  few,  while  multitudes — 
the  mass  of  population,  are  poor  and  degraded.  To  hira 
then,  who  is  inquiring  for  the  causes  which  are  connected 
with  the  prosperity  and  welfare  of  nations,  it  is  not  enough 
to  ask  in  what  way  a  supply  may  be  furnished  for  the 
wants  of  the  great  national  family.  He  must  also  direct 
his  attention  to  the  manner,  in  which  what  is  thus  provid- 
ed is  distributed, — he  must  shew  upon  what  principles  and 
in  what  ways,  this  distribution  may  be  so  effected,  as  to 
promote  the  greatest  good  of  the  whole,  and  of  each  indi- 
vidual. 

In  looking  at  the  early  and  more  simple  stages  of  so- 
ciety, few  inquiries  arise  respecting  the  distribution  of 
wealth.  Indeed  there  is  little  wealth  to  be  distributed. 
Each  one,  so  far  as  he  is  able,  makes  provision  for  the 
supply  of  his  own  immediate  wants,  and  small  accumula- 


DISTRIBUTION  OF  WEALTH.  233 

tions  and  few  exchanges  are  effected.  So  far  too  as  ex- 
changes are  made  and  producers  seek  a  remuneration  for 
their  productive  services,  the  basis  of  these  exchanges  and 
of  this  remuneration,  is  simply  the  amount  of  labor  be- 
stowed on  each  commodity.  "  If  among  a  nation  of  hun- 
ters," says  Smith,  "  it  usually  costs  twice  the  labor  to  kill 
a  beaver  which  it  does  to  kill  a  deer,  one  beaver  should 
naturally  exchange  for  or  be  worth  two  deer.  It  is  natu- 
ral that  what  is  usually  the  produce  of  two  days'  or  two 
hours'  labor,  should  be  worth  double  of  what  is  usually 
the  produce  of  one  day's  or  one  hour's  labor. 

"  If  the  one  species  of  labor  should  be  more  severe  than 
the  other,  some  allowance  will  naturally  be  made  for  this 
superior  hardship  ;  and  the  produce  of  one  hour's  labor  in 
the  one  way  may  frequently  exchange  for  that  of  two 
hours'  labor  in  the  other. 

"  Or  if  the  one  species  of  labor  requires  an  uncommon 
degree  of  dexterity  and  ingenuity,  the  esteem  which  men 
have  for  such  talents  will  naturally  give  a  value  to  their 
produce,  superior  to  what  would  be  due  to  the  time  em- 
ployed about  it.  Such  talents  can  seldom  be  acquired 
but  in  consequence  of  long  application,  and  the  superior 
value  of  their  produce  may  frequently  be  no  more  than  a 
reasonable  compensation  for  the  time  and  labor  which 
must  be  spent  in  acquiring  them.  In  the  advanced  state 
of  society,  allowances  of  this  kind,  for  superior  hardship 
and  superior  skill,  are  commonly  made  in  the  wages  of  la- 
bor ;  and  something  of  the  same  kind  must  probably  have 
taken  place  in  its  earliest  and  rudest  period. 

"  In  this  state  of  things,  the  whole  produce  of  labor  be- 
longs to  the  laborer ;  and  the  quantity  of  labor  commonly 
employed  in  acquiring  or  producing  any  commodity,  is 
20* 


234  POLITICAL  ECONOMY. 

the  only  circumstance  which  can  regulate  the  quantity  of 
labor  which  it  ought  commonly  to  purchase,  command,  or 
exchange  for." 

But  our  attention  is  to  be  directed  to  a  more  advanced 
state  of  society, — one  in  which  few  are  engaged  in  making 
direct  provision  for  the  supply  of  their  own  wants,  and 
where  other  agents  than  human  industry,  are  extensively 
employed  in  the  work  of  production.  We  look  on  a  com- 
munity, in  which  the  basis  on  which  wealth  is  distributed, 
has  become  more  complicated,  and  where  too  new  divi- 
sions and  classifications  of  society  have  arisen,  with  mutu- 
al relations  to  each  other  and  with  distinct  and  separate 
interests  and  pursuits:  Here  then  in  connexion  with  the 
distribution  of  wealth,  there  opens  to  us  a  new  and  inter- 
esting field  of  inquiry. 
^      One  leading  principle  of  great  importance  as  connected 

^  J  with  this  part  of  the  science  of  Political  Economy,  may 
Y  here  be  stated  and  should  be  kept  steadily  in  view.  It  is, 
that  wealth  should  be  left  to  flow  in  its  own  natural  chan- 
nels, unchecked  and  unimpeded.  Wherever  it  is  permit- 
ted thus  to  flow,  its  diffusion  becomes  most  general  and 
salutary  ;  for  it  is  there,  that  its  little  streams  are  found 
on  every  hill-side,  in  every  plain  and  valley,  and  the 
whole  region  is  a  well  watered  land.     Under  those  gov- 

y^  ernments  then,  where  full  protection  and  security  are  af- 
forded to  the  rights  of  person  and  of  property,  and  where 
no  regulations  or  institutions  exist,  inconsistent  with  the 

jy^ '  free  and  natural  distribution  of  wealth,  the  situation  of  the 
different  members  and  classes  of  the  community  becomes 
most  favorable.  That  there  are  many  governments,  even 
at  the  present  day,  whose  subjects  are  not  thus  favorably 
situated,  is  well  known.     In  many  of  the  nations  of  Eu- 


DISTRIBUTION  OF  WEALTH.  235 

rope,  the  rights  of  primogeniture  are  recognised,  and  in 
connexion,  the  system  of  entails  ;  and  both  these  institu- 
tions are  highly  injurious  to  the  best  interests  of  society.* 
Peculiar  privileges  are  also  granted  to  some  classes  of  the 
community  to  the  disparagement  of  others  ;  and  thus,  in 
connexion  with  a  system  of  favoritism,  the  distinctions  of 
society  become  more  marked,  and  wealth  is  not  only  une- 
qually, but  unfairly  distributed. 

In  the  statements  and  reasonings  which  follow,  none  of 
these  unfavorable  influences  are  supposed  to  exist.  We 
look  on  a  community,  in  which  wealth  is  left  to  diffuse  it- 
self in  a  manner,  which  is  consistent  with  the  rights  of  in- 
dividuals and  the  principles  of  the  social  compact. 

Economical  arrangement  for  the  distribution  of  Weatih. 

Revenue  is  what  accrues  from  productive  service  to  ^ 
those  by  whom  this  service  is  rendered.  This  productive 
service  may  be  human  labor?  and  then  the  returns  for  it 
are  called  wages.  It  may  be  rendered  by  capital,  under 
some  one  of  the  numerous  forms  assumed  by  capital  that 
it  may  become  productive,  and  what  thus  accrues  to  the 
owner  of  this  capital,  if  paid  by  another,  is  called  inter- , 
est ;  otherwise,  the  profits  of  capital.  Or  this  produc- 
tive service  may  be  rendered  by  land,  or  some  other  natu- 
ral agent,  acting  in  concert  with  man  and  under  his  direc- 
tion ;  in  this  case  the  revenue  yielded  to  the  proprietor  of 
the  land,  or  of  other  natural  agency,  if  paid  by  another,  is 

*  On  the  subject  of  primogeniture  and  entails,  I  would  refer 
the  student  to  an  instructive  passage  in  Smith's  Wealth  of  Na- 
tions, Vol.  I.  page  272. 


236  POLITICAL    ECONOMY. 

called  rent,  otherwise,  the  profits  of  natural  agency. 
There  is  yet  another  kind  of  productive  service,  rendered 
by  him  who  takes  upon  himself  the  arranging  and  con- 
ducting of  some  process  of  production,  and  on  whom  also 
rests  the  risk  of  its  success.  The  returns  to  this  kind  of 
productive  service  are  called  the  profits  of  the  undertaking, 
or  simply  profits.  Now  it  is  to  these  four  classes  of  the 
community,  to  the  laborer,  as  wages — to  the  capitalist,  as 
interest,  or  profits  of  capital — to  the  owner  of  land,  or 
other  natural  agency,  as  rent,  or  profits  of  natural  agency 
— and  to  the  undertaker,  as  profits,  that  the  gross  amount 
of  products  in  a  nation  are  prjmarily  apportioned  ;  and 
this  may  be  said  to  be  the  arrangement,  which  in  an  ad- 
vanced and  well  ordered  community,  is  established  for  the 
distribution  of  wealth. 

It  is  to  be  noticed,  that  the  distribution  to  be  made  is 
of  the  gross  amount  of  products.  What  uses  shall  be 
made  of  the  net  products,  that  is  of  what  remains  to  the 
producer  after  the  expenses  of  production  have  been  met, 
is  a  distinct  inquiry,  and  will  be  considered  when  treating 
on  the  consumption  of  wealth.  I  here  look  at  the  sum 
total  of  whatever  is  obtained  by  productive  service  of  ev- 
ery description  in  the  community.  It  is  true,  that  a  por- 
tion of  what  is  thus  produced  is  directly  consumed  by  the 
producer  himself,  but  this  portion,  in  an  advanced  state  of 
society,  is  inconsiderable.  We  may  then  in  theory  con- 
sider all  those  engaged  in  production  of  every  kind,  as 
contributors  to  this  gross  amount  of  products,  each  one 
drawing  out  in  return  for  the  productive  service  rendered 
by  him,  that  portion,  to  which  he  is  entitled,  and  which  is 
received  under  one  of  the  four  forms  above  stated. 

This  gross  amount  of  national  products  is  also  said  to 


DISTRIBUTION  OP  WEALTH.  237 

be  primarily  apportioned  to  producers ;  and  this  is  the  case. 
There  is  found  in  every  community,  a  numerous  class  of 
unproductive  laborers,  and  there  are  others,  who  neither 
labor  nor  furnish  productive  service  in  any  form.  These 
portions  of  the  community,  in  common  with  producers, 
have  wants  to  be  supplied,  and  this  supply  must  come 
from  the  gross  amount  of  national  products.  Still  it  is 
true,  that  the  returns  of  productive  service  accrue  in  the 
first  instance  to  producers,  and  to  them  only.  These 
producers  give  employment  to  unproductive  laborers,  and 
pay  over  to  them  in  return  for  these  services,  a  portion  of 
their  own  revenues.  Under  some  form  also,  as  charity, 
or  a  poor  tax,  these  productive  classes  of  the  community 
contribute  for  the  support  of  those,  who  are  to  be  ranked 
as  paupers  or  idlers  ;  and  thus  it  is,  that  products  are  u^ 
timately  distributed  to  every  member  of  the  community* 

Another  explanatory  remark  requires  attention.  The 
laborer,  the  capitalist,  the  owner  of  natural  agency  and 
the  undertaker,  are  spoken  of  as  constituting  distinct  class- 
es. To  this  in  theory  there  can  be  no  objection,  but 
practically,  the  productive  service  pertaining  to  two  op 
more  of  these  classes,  is  often  rendered  by  the  same  indi- 
vidual ;  and  consequently  the  returns  to  this  individual 
will  include  two  or  more  of  these  different  kinds  of  reve- 
nue. In  agricultural  production,  the  owner  of  the  land  is 
often  the  undertaker  of  the  work,  and  perhaps  furnishes 
the  capital  employed.  His  revenue  will  then  be  made 
up  of  rent,  profits  and  interest.  In  other  instances,  as  of» 
ten  occurs  in  manufactures  and  commerce,  the  same  man 
is  undertaker  and  capitalist.  He  then  receives  for  his 
portion  both  profits  and  interest.  But  not  unfrequently 
the  classes  are  found  entirely  distinct.     To  illustrate  this 


638  POLITICAL  ECONOMY. 

point,  and  also  to  exhibit  more  fully  the  economical  ar- 
rangement which  relates  to  the  distribution  of  wealth,  I 
shall  now  trace  out  this  distribution  in  the  case  of  differ- 
ent products. 

One  employed  in  the  business  of  production  has  raised 
a  crop  of  wheat,  suppose  1000  bushels,  which  is  valued 
at  $1,00  per  bushel.  The  wheat  produced  constitutes  a 
part  of  the  gross  amount  of  national  products,  and  its  val- 
ue in  the  form  of  money,  we  will  suppose  to  be  in  the 
hands  of  the  producer,  to  be  divided  among  those,  who 
have  contributed  any  portion  of  productive  service  towards 
the  raising  of  the  crop.  The  producer  is  the  owner  nei- 
ther of  land  nor  of  capital,  nor  has  he  taken  any  part  in 
the  labors  of  the  farm.  He  is  the  undertaker — that  is,  he 
has  planned,  arranged  and  conducted  the  process.  He 
went  to  the  landlord,  and  for  a  stipulated  sum  obtained  of 
him  the  use  of  land.  He  went  to  the  capitalist,  and  by 
agreeing  to  pay  the  customary  rate  of  interest  he  obtained 
capital.  He  collected  laborers,  contracting  to  pay  them 
the  usual  wages  of  laborers  thus  employed.  After  thus 
securing  the  productive  service  in  its  different  forms  need- 
ed for  the  undertaking,  he  made  further  arrangements, 
and  took  upon  himself  the  over-sight,  and  conduct,  and 
risk  of  the  whole  adventure.  And  now  that  the  returns 
are  in  his  hands  in  the  form  of  money,  a  distribution  is 
easily  made.  The  stipulated  sum,  which  is  the  usual 
amount  paid  for  the  use  of  land  of  the  same  quality,  is 
paid  to  the  owner  of  land  as  rent ;  the  usual  rate  of  inter- 
est is  given  to  the  capitalist,  for  the  capital  employed,  and 
the  laborers  receive  their  portion  as  wages.  What  re- 
mains of  the  $1000  belongs  to  the  undertaker  as  the 
profits  of  the  adventure. 


DISTRIBUTION  OF  WEALTH.  239 

Take  now  the  example  of  a  manufactured  product — a 
piece  of  broadcloth.  In  this  instance,  the  undertaker 
needs  only  the  productive  service  of  capital  and  labor. 
By  means  of  the  former,  he  furnishes  himself  with  the 
raw  material  used  in  this  fabric,  and  with  machinery  and 
whatever  other  helps  are  needed  in  conducting  the  pro- 
cess of  production.  And  here,  as  before,  when  returns 
are  received,  a  portion  goes  to  the  capitalist  for  the  pro- 
ductive service  of  capital,  another  portion  to  the  laborers 
as  wages,  and  what  remains  as  profits  to  the  undertaker. 
But  here  it  is  to  be  noticed,  that  the  principal  material  of 
which  the  broadcloth  is  composed,  is  itself  an  agricultural 
product,  in  the  furnishing  of  which  a  distinct  set  of  pro- 
ductive services  have  been  called  into  action.  So  it  is 
with  other  materials — the  drugs  used  in  dying  the  cloth  ; 
these  have  been  furnished  by  the  productive  service  of  cap- 
ital and  labor,  perhaps  of  appropriated  natural  agency,  and 
connected  with  their  production,  profits  have  been  made 
by  those  who  have  undertaken  and  conducted  it.  A 
portion  of  the  value  then  received  in  exchange  for  the 
broadcloth,  and  which  is  first  divided  among  the  laborers 
and  capitalist  and  undertaker,  by  whose  joint  productive 
services  the  manufactured  product  isobtained,  is  subject 
to  further  distribution, — it  goes  to  pay  for  the  productive 
services  of  those,  by  whom  the  materials  used  in  the 
manufactured  product  are  furnished.  This  portion  has 
perhaps  been  advanced  to  the  producers  of  these  materi- 
als, long  before  the  product  is  in  the  hands  of  the  consu- 
mer. To  make  these  advances,  is  one  part  of  the  pro- 
ductive service  rendered  by  the  capital  of  the  manufacturer. 
Thus  it  is,  that  eventually  the  value  of  the  product  is  dis- 
tributed, not  only  among  those  employed  in  its  manufac- 


240  POLITICAL  ECONOMY. 

ture,  but  among  those,  who  have  furnished  the  materials 
of  which  it  is  made,  or  been  in  any  way  instrumental  in 
its  production. 

In  the  statements  which  have  been  made,  the  returns 
for  productive  service  are  supposed  to  be  made  in  the 
form  of  money.  This  is  not  necessarily  the  case  ;  there 
may  be  a  distribution  of  the  products  themselves  in  pay- 
ment for  this  service.  But  it  is  usually  found  more  con- 
venient, both  for  those  who  pay,  and  for  those  who  re- 
ceive, that  these  transactions  should  be  conducted  by  the 
help  of  a  circulating  medium.  Soon,  however,  the  money 
thus  received  as  rent,  or  interest,  or  wages,  or  profits,  is 
exchanged  for  such  commodities,  as  the  individuals  re- 
ceiving it  need  for  the  supply  of  their  wants.  Thus,  in 
effect,  each  producer  is  contributing  towards  the  gross 
amount  of  national  products,  and  then,  by  means  of  the 
same  productive  service,  drawing  out  in  return  some  por- 
tion of  these  products. 

But  here  the  question  presents  itself,  what  determines 
the  amount  to  be  paid  severally  to  the  laborer,  the  cap- 
italist, the  owner  of  natural  agency  and  the  undertaker  ? 
In  the  cases  stated,  the  usual  rate  is  supposed  to  be  paid ; 
but  on  what  principles,  and  in  what  manner,  does  a  cus- 
tomary or  usualrate  become  fixed  ?  To  this  inquiry,  and 
others  connected  with  wages,  interest,  rent  and  profits,  th© 
attention  will  be  directed  in  the  following  chapters. 


241 

CHAPTER  II. 

Wages. 

No  inquiries  in  Political  Economy  are  of  more  prac- 
tical importance,  than  those  connected  with  the  suhject  of 
wages.  This  results  from  the  fact,  that  in  respect  to  most 
commodities,  labor  is  a  principal  item  in  the  cost  of  their 
production,  and  also  from  a  consideration  of  the  large  num- 
ber in  every  community,  whose  interests  are  involved  in 
these  inquiries. 

Before  entering  upon  any  discussion  of  the  question 
proposed  at  the  close  of  the  last  chapter,  as  applied  to 
wages,  I  remark,  that  in  these  inquiries,  labor  is  to  be  re- 
garded as  a  commodity,  the  price  of  which  is  paid  under 
the  form  of  wages.  It  is  also  to  be  kept  in  mind,  that  it 
is  the  average  price  of  common  labor,  with  which  we  are 
here  concerned.  I  mean  the  average  price  of  that  labor, 
which  is  employed  in  the  common  branches  of  produc- 
tion. In  some  employments  the  presence  of  peculiar  cir- 
cumstances so  affects  the  price  of  labor  as  to  raise  it  far 
above  the  average  price  of  common  labor.  Of  such  in- 
stances, mention  will  be  made  hereafter. 

Upon  what  then  does  the  average  rate  of  wages,  or  the 
price  of  the  commodity — labor,  depend  ?  And  here  it  is 
necessary  to  refer  back  to  the  principles,  brought  to  view 
when  treating  on  price.  It  was  there  stated,  that  the  ba- 
sis of  price  is  the  cost  of  production,  while  its  temporary 
variations  depend  on  the  fluctuations  of  the  market,  or  the 
varying  influence  of  supply  and  demand.  If  then  we 
look  at  labor  as  a  commodity,  and  wish  to  determine  its 
price,  we  have  to  apply  the  same  principles,  as  are  appli- 
21 


242  POLITICAL    ECONOMY. 

cable  in  the  case  of  other  commodities.  We  must  first 
direct  our  inquiries  to  the  cost  of  its  production,  and  then 
see,  what  influences  of  the  nature  of  supply  and  demand 
affect,  as  it  has  been  called  in  respect  to  other  commodi- 
ties, the  cost  price. 

Viewing  labor  then  as  a  commodity,  what  is  the  cost 
of  its  production  ?  1  answer,  it  is  what  in  different  com- 
munities is  consumed  in  support  of  laborers  and  their  fam- 
ilies. Stating  the  same  proposition  under  another  form, 
I  mean,  that  the  point  where  there  is  a  tendency  of  the 
rate  of  wages  in  every  community  to  settle,  is  determined 
by  what  will  furnish  a  support  to  the  laborer  and  his  fam- 
ily, according  to  the  usual  style  of  living  in  the  comniuni- 
ty.  As  will  be  seen  presently,  supply  and  demand,  and 
other  causes  may  and  will  produce  variations  from  this 
cost  price,  but  it  is  to  this  point  that  the  rate  of  wages 
tends  in  every  community.  Hence  it  will  readily  be  in- 
ferred, that  if  the  style  of  living  which  prevails  among  the 
laboring  population  in  any  country,  is  either  raised  or  de- 
pressed, there  will  be  a  correspondent  rise  or  fall  in  the 
cost  price  of  labor.  So  too,  if  from  any  cause,  the  price 
of  the  necessaries  of  life  should  vary,  increasing  or  dimin- 
ishing the  expenses  of  the  laborer  in  sustaining  himself 
and  his  family,  a  like  variation  will  take  place  in  the  cost 
price  of  labor.  This  is  seen  In  those  countries,  where 
machines,  which  have  reduced  the  price  of  the  common 
articles  of  life,  have  been  extensively  introduced. 

But  instead  of  stopping  to  illustrate  and  establish  these 
two  propositions,  let  us  first  look  at  the  influences,  which 
cause  a  variation  from  the  cost  price  of  labor.  And  here 
is  brought  to  our  view,  what  is  usually  considered  the  great 
regulating  principle  of  the  rate  of  wages — the  rates  be- 


WA6ES.  243 

tween  the  productive  capital  of  a  country  and  its  laboring 
population.  It  is  the  common  theory  of  political  econo- 
mists, that  as  the  amount  of  productive  capital  in  a  nation 
is  large  or  small,  in  proportion  to  the  number  of  laborers, 
the  rate  of  wages  will  be  high  or  low.  The  same  propo- 
sition, with  a  slight  modification,  I  would  here  advance,  as 
expressing  the  disturbing  influence  of  supply  and  demand 
on  the  cost  price  of  labor.  The  modification,  to  which  I* 
refer,  is,  that  instead  of  the  whole  amount  of  productive 
capital,  we  speak  only  of  that  part,  which  is  so  directed 
as  to  give  employment  to  laborers.  The  importance  of 
this  limitation  will  be  seen,  when  we  look  at  those  coun- 
tries in  which  machinery  is  extensively  used. 

But  it  is  necessary  to  be  more  explicit  in  the  statement 
and  application  of  this  proposition.  The  demand  in  this 
case  is  the  work  to  be  done,  and  the  supply  is  the  num- 
ber of  laborers  in  the  community,  ready  to  undertake  this 
work.  By  the  work  to  be  done,  is  meant  the  work,  which 
some  one  proposes  to  accomplish,  furnishing  what  is  neces- 
sary to  carry  it  forward.  But  capital  is  what  is  necessary 
that  work  may  thus  be  undertaken  and  accomplished ;  and 
hence  it  is,  that  the  demand  for  labor  is  said  to  depend  on 
the  amount  of  capital  in  a  community,  which  is  so  direct- 
ed as  to  give  employment  to  laborers.  If  from  any  cause, 
the  amount  of  this  productive  capital  so  directed,  is  dimin- 
ished, there  will  be  less  work  to  be  done,  that  is,  there 
will  be  less  demand  for  labor  ;  and  hence,  if  the  laboring 
population  continues  the  same,  the  ratio  between  the  de- 
mand and  supply  will  vary,  and  the  price  of  labor  will 
fall.  So  too,  if  the  amount  of  capital,  giving  employ- 
ment to  laborers,  remains  the  same,  while  from  some 
cause  there  is  a  diminution  in  the  number  of  laborers,  the 


244  POLITICAL    ECONOMY. 

ratio  between  supply  and  demand  will  again  be  disturbed, 
and  the  price  of  labor  will  rise.  And  the  converse  of 
these  propositions  will  also  hold  true.  Thus  in  respect 
to  the  commodity — labor,  there  will  be  in  every  country 
a  variation  of  its  price,  dependent  on  the  ratio  of  supply 
and  demand  ;  and  this  variation  will  sometimes  raise  the 
cost  price  above  the  exchangeable  price,  and  sometimes 
sink  it  below. 

To  illustrate  and  more  fully  exhibit  these  statements,  I 
propose  to  look  at  the  rate  of  wages  in  different  countries. 

In  England,  the  average  rate  of  wages  is  from  twenty 
pence  to  two  shillings  per  day.  This  probably  is  not  far 
from  the  cost  price  of  labor  in  that  country,  since  at  this 
rate,  the  laboring  population  can  sustain  itself,  though  few 
are  able  to  make  accumulations  of  capital,  and  thus  rise 
into  a  higher  class  than  that  of  laborers.  Looking  then 
at  those  causes  which  affect  the  cost  price  of  labor,  we 
find,  that  the  style  of  living  in  England  is  a  style  of  com- 
fort and  abundance,  more  so  than  in  most  neighboring  na- 
tions. This  high  style  of  living  has  a  tendency  to  raise 
the  cost  price  of  labor ;  but  on  the  other  hand,  the  price 
of  many  commodities  used  by  the  laborer,  is  lower  in  Eng- 
land, than  in  most  other  countries,  and  this  is  a  counter- 
acting cause,  which  brings  down  the  cost  price  of  labor. 
And  here  we  may  notice  the  effects  on  wages  of  machine- 
ry, whep  extensively  used  in  a  country.  The  produc- 
tive capital  of  England  is  immense,  and  were  the  whole  of 
it  so  directed  as  to  give  employment  to  laborers,  the  price 
of  labor  would  at  once  rise  above  its  cost  price,  and  above 
the  standard  price  in  neighboring  nations.  For  though 
the  population  of  England  is  large,  the  amount  of  its  whole 
productive  capital  in  proportion  to  its  population,  far  ex- 


WAGES.  245 

ceeds  that  of  any  other  European  nation.  The  tendency 
of  machinery  then,  when  extensively  used,  is  to  reduce 
the  rate  of  wages.  But  this  disadvantage  to  the  laborer 
is  counterbalanced  by  the  reduction  in  the  cost  of  many 
necessary  commodities,  which  also  attends  the  introduc- 
tion of  machinery.  The  same  cause,  which  lowers  the*^*^ 
rate  of  visages,  increases  their  value. 

And  in  this  connexion  may  be  mentioned  an  advantage, 
which  results  to  a  nation  from  a  low  rate  of  wages  when 
compared  with  other  nations.  Labor,  as  has  been  stated, 
is  a  principal  item  in  the  cost  of  production  of  many  pro- 
ducts. In  those  countries,  then,  where  the  rate  of  wages 
is  low,  other  circumstances  being  equally  favorable,  pro- 
ducts can  be  afforded  at  a  lower  rate  than  where  the  price 
of  labor  is  higher.  And  when  these  nations  come  into 
competition  in  foreign  markets,  the  advantage  arising  from 
this  circumstance  will  be  felt,  since  a  low  rate  of  wages 
will  give  a  command  of  the  market.  Thus,  while  the  con- 
dition of  the  laborer  in  England  is  no  less  favorable,  than 
it  would  be  with  a  higher  rate  of  wages  if  attended  with  a 
higher  price  of  the  necessaries  of  life,  the  cause  of  produc- 
tion is  advanced  generally  in  the  country  by  the  low  pricey 
of  labor,  which  gives  to  the  manufactures  of  that  country 
an  important  advantage  in  foreign  markets. 

Look  next  at  Ireland.  Here  the  rate  of  wages  is  about 
six  pence  per  day,  and  this  its  average  rate  is  below  the 
cost  price  of  labor  in  that  country  ;  for  the  laboring  popu- 
lation of  Ireland  cannot  sustain  itself.  The  style  of  living 
is  not  only  reduced  to  the  lowest  point  possible,  but  many 
die  of  famine,  or  are  compelled  to  emigrate  to  other  coun- 
tries. Here  then  the  effect  of  the  principle  of  supply  and 
demand  is  most  fully  felt.  The  population  is  dense,  and 
21* 


246  POLITICAL  ECONOMY. 

the  amount  of  productive  capital  giving  employment  to 
laborers,  is  small.  The  supply  of  the  commodity — labor, 
far  exceeds  the  demand  for  it,  and  its  price  is  reduced. 

Look  next  at  the  United  States.     Here  the  rate  of  wa- 
ges is  not  far  from   seventy  five  cents  per  day.     This  is 
*"  'above  the  cost  price,  for  laborers  are  not  only  able  tosup- 
^^    port  themselves,  but  large  numbers  are  continually  mak- 
^   ing  accumulations  of  capital  and  rising  from   the  class  of 
laborers  into  that  of  capitalists.     Here  then  the  influence 
of  supply  and  demand  are  felt ;  but  it  is  to  raise  the  ex- 
changeable price  of  labor  above  its  cost  price,  and  not  to 
reduce  it  below,  as  in  the  case  of  Ireland.     It  is  true,  that 
the  productive  capital  of  the  United  States  is  not  so  large, 
i  in  proportion   to  its  laboring  population,  as  that  of  Eng- 
ff^  land,  but  a  larger  part  of  the  capital  is  so  directed  as  to 
'  give  employment  to  laborers.     It  is  true  also,  that  thein- 
'crease  of  population  in  this  country  is  much  greater  than 
\[\n  England,  and  this  tends  to  lower  the  rate"  of  wages  ; 
t^""^  but  to  counterbalance  this  greater  rate  of  increase  in  the 
population,  it  should  be  remembered,  that  multitudes  as 
just  stated,  are  continually  rising  from  the  class  of  labor- 
ers into  that  of  capitalists  and  land  owners  ;  and   hence 
the  increase  in  the  class  of  laborers  is  not  in  proportion 
to  the  increase  of  population  in  the  country.     Thus  it  re- 
sults, that  though  the  style  of  living  of  the  laboring  popu- 
lation in  the  United   States  is  high,  still,  as  the  demand 
for  the  commodity — labor  is  great  in  proportion  to  the 
supply,  the  rate  of  wages  is  higher  than  the  cost  price  of 
labor,  and  higher  than  in  any  other  country. 

The  statements  and  illustrations  now  given,  are  suffi- 
cient to  explain  most  of  the  variations  which  occur  in  the 
rate  of  wages.     But  before  leaving  the  subject,  it  may  be 


€ 


WAGES.  247 

well  to  trace  out  some  further  consequences,  which  result 
from  the  same  causes.  Look  then  first  at  the  communi- 
ty, where,  from  a  reduction  in  the  cost  of  the  necessaries 
of  life,  the  value  of  wages  has  risen,  their  rate  remaining 
the  same.  Here,  probably,  there  will  eventually  follow 
an  increase  in  the  laboring  population,  for  there  is  a  ten-  ^ 
dency  in  population  always  to  progress  at  the  same  rate]  / 
with  the  means  of  support.  But  as  this  result  cannot  fol- 
low till  after  some  years  have  elapsed,  in  the  mean  time 
the  style  of  living  among  laborers  will  be  improved ;  and 
as  men  are  not  prone  to  reduce  their  style  of  living  further 
than  is  absolutely  necessary,  some  permanent  improve- 
ment will  probably  result.  Hence,  no  doubt  it  is,  that  in 
most  modern  nations  the  condition  of  the  laboring  popu- 
lation has  of  late  years  been  advancing.  The  rate  of  wa- 
ges has  perhaps  remained  the  same,  but  their  value  has 
been  increased,  and  there  is  a  more  general  enjoyment  of 
the  comforts  and  conveniences  of  life. 

Look  next  at  a  community,  in  which  from  some  cause 
the  style  of  living  is  reduced.  This  reduction  may  also 
be  attended  with  an  increase  of  population,  especially 
where  the  rate  of  wages  continues  the  same.  But  gene- 
rally, a  reduction  in  the  style  of  living  is  followed  by  a» 
correspondent  fall  in  the  rate  of  wages.  It  is  always  the 
aim  of  those  who  undertake  processes  of  production,  and 
thus  are  the  immediate  agents  in  giving  employment  to 
laborers,  to  reduce  wages  to  the  lowest  point  to  which 
they  can  be  brought,  since  in  this  way,  the  amount  of  what 
remains  to  the  undertaker  as  profits  becomes  larger. 
Hence,  if  the  laboring  population  consent  to  a  reduction 
in  the  style  of  living,  it  is  usually  followed  by  a  lower  rate 
of  wages.     But  here  it  should  be  noticed,  that  there  is  a 


9548  POLITICAL    ECONOMY. 

limit,  beyond  which  it  ceases  to  be  for  the  interest  of  the 
undertaker  to  effect  a  reduction  in  the  price  of  labor. 
For  unless  the  laborer  is  able  to  support  himself,  and  to 
rear  up  a  family,  soon  the  numbers  of  the  laboring  popu- 
lation will  be  diminished,  and  then,  the  supply  of  labor 
becoming  less  than  the  demand,  the  price  will  rise. 
Hence  it  follows,  that  it  is  not  for  the  advantage  of  any 
part  of  the  community,  that  the  rate  of  wages  should  fall 
below  the  cost  price  of  labor — that  is,  below  what  is  ne- 
cessary to  support  in  health  and  comfort  the  laborer  and 
his  family. 

And  here  perhaps  it  may  be  well  to  allude  to  some  of 
those  causes,  which  lead  to  variations  in  the  ratio  between 
productive  capital  and  the  laboring  population  in  different 
countries,  and  thus  affect  the  rate  of  wages.  With  this 
object  in  view,  I  offer  the  following  historical  illustrations. 

We  are  told,  that  in  the  reign  of  Louis  XIV,  the  opinion 
prevailed  in  France,  that  the  laboring  classes  are  benefit- 
ed by  the  profuse  consumption  of  commodities.  Hence, 
at  that  period,  the  rich  indulged  in  extravagance  and  dis- 
sipation of  every  kind.  Estates,  which  had  been  accu- 
mulating for  many  years,  were  wasted  in  a  few  months. 
But  in  a  short  time,  the  ruinous  effects  of  this  course  be- 
came too  obvious  to  be  unnoticed  or  mistaken.  The 
want  of  capital  was  severely  felt  in  different  branches  of 
production,  many  profitable  employments  were  abandon- 
ed, and  general  ruin  and  poverty  threatened  the  country. 
The  laboring  population,  who,  it  had  been  supposed, 
would  derive  benefit  from  this  profusion,  found  themselves 
deprived  of  their  usual  employment.  The  supply  of 
labor  far  exceeded  the  demand,  and  the  consequence  was 
a  reduction  of  its  price. 


WAGES.  249 

The  plague,  which  prevailed  in  London  in  1665,  is 
said  to  have  swept  off  90,000  inhabitants  of  that  city  in  a 
single  year  ;  and  a  large  proportion  of  this  number  were 
laborers.  This  diminution  of  the  laboring  population  was 
immediately  followed  by  a  rise  of  wages.  The  supply  of 
labor,  fell  short  of  the  demand,  and  though  Parliament,  by 
passing  an  act  for  the  regulation  of  wages,  endeavored  to 
keep  them  at  the  former  rate,  it  was  a  vain  attempt. 

About  the  year  1500,  Vasquez  de  Gama  discovered 
the  passage  round  the  Cape  of  Good  Hope,  thus  opening 
a  new  route  to  the  East  Indies.  The  consequences  of 
this  important  event,  and  of  the  discovery  of  America 
made  about  the  same  time,  were  immediately  felt  by  all 
the  nations  of  Europe.  A  new  stimulus  was  given  to  ev- 
ery branch  of  production,  and  wealth  in  overflowing 
streams  poured  in  upon  the  nations.  An  important  ad- 
vance was  at  once  made  in  the  condition  of  laborers. 
The  demand  for  labor  became  much  greater  than  before 
the  rate  of  wages  fell,  and  at  the  same  time,  from  a  reduc- 
tion in  the  price  of  commodities,  their  value  was  increas- 
ed. 

Other  examples  of  the  same  nature,  connected  with 
wars,  civil  revolutions  and  commotions,  and  illustrative  of 
the  same  principle,  are  found  in  the  history  of  almost  ev- 
ery people. 

But  there  is  another  circumstance  of  equal  or  greater  im- 
portance to  the  prosperity  of  the  laborer,  than  a  high  rate 
of  wages,  or  their  high  value  arising  from  a  low  price  of 
the  necessaries  of  life.  I  refer  to  the  opportunity  enjoy- 
ed by  him  for  the  profitable  investment  of  his  savings. 
Where  this  is  the  case,  the  laborer  sees  constantly  before 
him  the  prospect  of  improving  his  condition,  and  of  rising 


250  POLITICAL    ECONOMY. 

into  a  higher  class  in  society,  and  hence  he  is  led  both  to 
more  vigorous  efforts  and  to  greater  frugality.  It  is  on 
this  account  that  the  condition  of  laborers  in  the  United 
States  is  more  favorable,  than  in  any  other  part  of  the 
world.  Hence,  also,  the  importance  of  Savings  Banks 
and  otlier  similar  institutions  to  the  laboring  part  of  a 
community,  might  be  inferred.  But  to  this  topic  allusion 
is  made  in  another  place. 

Besides  the  variations  in  the  rate  and  value  of  wages 
which  have  now  been  brought  to  view,  there  are  others 
arising  from  a  different  source,  and  which,  in  distinction 
from  the  former,  are  called  nominal  variations.  I  refer 
to  those  changes  in  the  rate  of  labor,  which  are  connected 
with  alterations  in  the  value  of  the  circulating  medium. 
And  here  the  same  principles  are  applicable  to  the 
price  of  labor,  as  have  been  applied  to  other  commodities. 
If  a  depreciation  takes  place  in  the  value  of  money,  the 
price  of  commodities  rises,  and  on  the  other  hand,  if  the 
value  of  money  becomes  greater,  the  price  of  commodi- 
ties falls.  But  if  the  same  rise  or  fall  be  made  in  the 
price  of  labor,  as  is  made  in  the  price  of  other  commodi- 
ties, it  is  evident,  that  though  the  rate  of  wages  may  va- 
ry, their  value  remains  unaltered,  and  the  condition  of  the 
laborer  is  in  no  way  affected  ;  and  hence  the  variation  is 
said  to  be  nominal.  Sometimes  however  it  happens, 
when  a  depreciation  occurs  in  the  value  of  money,  that 
the  rate  of  wages  will  continue  the  same ;  at  least  some 
time  will  elapse,  before  the  rate  of  wages  becomes  adapt- 
ed to  the  variation  in  the  value  of  money.  In  this  case 
inconvenience  and  loss  arise  to  the  laborer. 

And  here  I  remark,  that  fluctuations  in  the  rate  of  wa- 
ges, from  whatever  source  they  may  arise,  are  generally 


WAGES.  251 

injurious  to  the  interests  of  the  laboring  population.  If 
there  is  a  sudden  depression,  the  consequent  privations 
and  embarrassments  are  immediately  and  severely  felt. 
If,  on  the  other  hand,  there  is  a  sudden  but  temporary 
rise,  though  the  laborer  finds  himself  in  possession  of  more 
ample  supplies  for  a  while,  the  effects  which  ultimately 
follow  are  usually  injurious.  Either  his  habits  of  indus- 
try are  relaxed,  or  his  style  of  living  is  raised  to  a  point 
where  it  cannot  be  sustained,  and  the  reduction  of  it 
which  follows,  is  both  mortifying  and  embarrassing.  It 
may  then  be  considered  as  a  settled  principle,  that  the 
condition  of  the  laborer  is  most  favorable,  so  far  as  it  de- 
pends on  the  rate  of  wages,  in  those  communities,  where 
the  price  of  labor  continues  about  the  same,  with  no  sud- 
den and  temporary  fluctuations.  Especially  is  this  the 
case,  where  the  progress  of  society  in  arts  and  wealth  is 
attended  with  a  gradual  advancement  in  the  value  of  wa- 
ges. 

The  principles  stated  in  this,  chapter,  are  designed  to 
apply  to  the  average  rate  of  the  wages  of  common  laborers 
— those  engaged  in  the  ordinary  employments  of  life. 
There  are  instances  of  variation  from  this  average  rate 
already  alluded  to,  and  which  arise  from  different  circum- 
stances. Some  of  these  circumstances  will  now  be  sta- 
ted. 

STcill  and  talent.  For  the  successful  performance  of 
some  kinds  of  labor,  a  long  apprenticeship,  or  course  of 
previous  training  is  required,  which  is  necessarily  attended 
with  expense.  A  portion  of  capital  thus  becomes  perma- 
nently vested  in  the  laborer  himself,  and  the  higher  remu- 
neration which  he  receives  for  his  services,  may  be  looked 
upon  as  paid  in  part  for  the  use  of  the  capital  thus  vested. 


252  POLITICAL    ECONOMY. 

A  watchmaker,  for  example,  or  any  artist,  expects  on  this 
account  to  receive  higher  wages,  than  a  common  day  la- 
borer. In  other  instances,  the  success  of  the  laborer  de- 
pends on  the  possession  of  some  peculiar  natural  endow- 
ment, as  in  the  case  of  the  portrait  or  historical  painter,  or 
of  the  musician.  We  may  look  upon  such  endowments 
as  natural  agency  of  a  peculiar  kind,  of  which  there  is  a 
limited  supply.  And  thus,  a  part  of  what  is  paid  under 
the  name  of  wages,  is  in  fact  a  remuneration  for  the  use  of 
this  peculiar  natural  agency. 

Constancy  of  employment.  In  some  kinds  of  work,  a 
laborer  can  be  employed  but  a  part  of  his  time.  Hence 
he  expects  to  receive  higher  wages  for  the  time  during 
which  he  is  engaged.  In  cold  climates,  a  mason  cannot 
work  at  his  trade  in  the  winter  season,  and  hence  his  wa- 
ges are  higher,  than  those  of  other  mechanics  engaged  in 
similar  employments.  Hence  too  job-work  is  paid  at 
higher  rates,  than  when  men  are  steadily  employed. 

Trust  and  responsibility.  When  men  are  engaged  in 
employments,  in  which  there  is  much  difficulty,  or  in 
which  a  large  amount  of  property  is  entrusted  to  their 
care,  and  its  safety  and  right  management  depend  on  their 
fidelity  and  success,  their  wages  are  enhanced  by  this  trust 
and  responsibility.  It  is  in  part  on  this  account,  that  the 
wages  of  the  master  of  a  vessel  so  much  exceed  those  of 
any  one  of  his  crew. 

Numerous  other  circumstances  lead  to  the  same  result. 
Some  employments  are  dangerous, — some  are  noisome 
and  unpleasant, — some  are  looked  upon  as  degrading. 
In  these  several  instances,  the  remuneration  received  by 
the  laborer  for  his  services,  is  greater  than  the  average  rate 
of  wages. 


POPULATION.  253 


On  population  as  connected  with  Political  Economy. 

From  the  statements  found  in  this  Chapter,  we  may 
learn  in  what  manner  the  subject  of  population  is  connect- 
ed with  Political  Economy.  It  has  been  said,  that  the 
supply  of  the  commodity — labor,  will  depend  on  the  num- 
ber of  laborers  in  a  community  ready  to  engage  in  any 
work  of  production.  The  tendency  then  of  an  excess  of 
population,  must  be  to  diminish  the  rate  of  wages,  while 
at  the  same  time,  perhaps,  from  the  great  demand  for  the 
necessaries  of  life,  the  value  of  the  small  sum  received  by 
the  laborer  is  also  reduced.  Hence  poverty  and  suffering 
ensue,  and  population  is  said  to  press  upon  the  means  of 
subsistence.  And  here  some  political  economists,  basing 
their  speculations  on  the  different  ratio  of  increase  of  the 
means  of  subsistence,  on  the  one  hand,  and  of  population 
when  unchecked  on  the  other,  have  maintained,  that  every 
advancing  nation,  and  indeed  the  whole  human  race,  is 
destined  to  the  same  disastrous  results.  The  time,  say 
they,  will  come,  when  more  will  be  born  into  the  world 
than  can  be  sustained,  and  long  before  that  point  is  reach- 
ed, the  privations  and  sufferings  of  men  must  be  great. 
Indeed  they  seem  to  look  upon  diseases,  famine,  wars, 
and  other  evils  whicli  men  bring  upon  themselves  by  their 
own  rash  and  vicious  indulgencies,  as  retarding  causes  in 
the  progress  of  society  to  its  wretched  destination.  Other 
remedies,  however,  of  a  more  humane  and  elevated  kind, ' 
are  proposed  by  this  school  of  political  economists.  For 
this  purpose  they  recommend  what  they  term  moral  checks, 
including  under  this  term  whatever  tends  to  make  men 
more  considerate,  and  to  lead  them  to  a  more  just  and  en- 
22 


\ 


254  POLITICAL  ECONOMSr. 

larged  sense  of  the  relative  duties  of  life.  Education,  aai 
it  enlightens  the  mind  and  extends  its  views,  and  at  the 
same  time  matures  the  judgment,  is  especially  enjoined. 

Others  who  have  turned  their  attention  to  this  subject, 
look  to  different  sources  for  the  prevention  or  remedy  of 
the  evils  of  an  excessive  population.  Some  have  main- 
tained, that  from  the  nature  of  production,  every  one, 
however  populous  the  world  may  become,  will  be  able  to 
sustain  himself.  Production,  say  they,  is  the  creation  of 
utility,  and  it  is  this  utility  which  is  the  basis  of  value. 
Every  one  then  who  is  willing  to  bring  productive  service 
of  any  kind  into  action,  will  in  return  receive  what  may 
be  required  for  his  support.  He  will  thus  draw  out  for 
himself  some  portion  of  the  gross  national  products.  Others 
look  for  a  remedy  in  the  indefinite  extent,  to  which  the  ac- 
cumulation of  productive  capital  may  be  carried.  It  is 
capital,  say  they,  which  is  the  basis  of  demand  for  labor, 
and  since  capital  is  unlimited  in  its  extent,  it  can  never 
be  exceeded  by  the  supply.  Productive  employment 
will  then  always  be  furnished  for  those  disposed  to  labor. 
Whatever  opinion  may  be  entertained  respecting  the 
speculations  of  writers  on  this  subject,  the  following  posi- 
tions may  be  maintained. 
/    1.    The  period  when  the  surface  of  the  earth  shall  be 

/  so  covered  with  inhabitants,  that  population  will  equal  the 
means  of  subsistence,  is  so  distant,  and  all  calculations  and 
reasonings  relating  to  this  state  of  things  so  indefinite  and 

^.  shadowy,  that  the  whole  subject  is  one  of  no  practical  im- 
portance. 

2.    Most  of  the  evils  which  are  wont  to  be  ascribed  to 

^  an  excess  of  population,  may  be  traced  to  some  existing 
abuses  of  civil  institutions,  or  to  some  unwise  neglect  of 


PROFITS  OF  CAPITAL.  ^55 

nations  to  avail  themselves  of  the  productive  resources 
within  their  power.  Most  of  the  nations  of  Europe  afibrd 
examples  of  the  former  kind  ;  China  is  an  instance  of  the 
latter. 

These  propositions  are  not  meant  to  undervalue  the  im- 
portance of  moral  checks,  or  of  any  measures  which  are 
designed  and  fitted  to  improve  the  condition  of  men,  and 
remove  the  evils  and  abuses  to  which  they  are  exposed. 
They  are  merely  designed  to  afford  a  reason  for  omitting 
the  further  consideration  of  the  question 


CHAPTER  III. 
Interest y  or  profits  of  capital. 

Our  attention  is  now  to  be  directed  to  interest,  or  that 
portion  of  the  gross  amount  of  national  products,  which  in 
the  distribution  made  to  producers,  is  assigned  to  the  cap- 
italist, as  the  remuneration  of  the  productive  service  of 
capital.  Of  the  nature  of  capital,  the  different  forms  which 
it  assumes  in  the  processes  of  production,  and  its  various 
uses,  I  have  before  treated ;  and  thus  the  way  has  been 
prepared  for  understanding  the  nature  of  interest,  and  the 
principles  by  which  its  rate  is  determined. 

It  is  a  common  impression,  and  one  that  needs  to  be  , 
corrected,  that  interest  is  a  sum  of  money  paid  for  the  use 
of  money.     But  though  for  the  convenience  of  those  re- 
ceiving the  loan,  and  the  facility  of  computation,  capital  is 
more  frequently  loaned  and  interest  paid  in  the  form  of 


256  POLITICAL  ECONOSfY. 

money  than  in  other  forms,  neither  of  these  circumstances 
is  essential  to  the  transaction.  Capital  may  be  loaned  in 
any  of  the  various  forms  which  it  assumes,  and  it  is  for 
the  use  of  capital,  and  not  of  money  merely,  that  inter- 
est is  paid.  Interest  also  is  not  unfrequently  paid  in  kind, 
that  is,  in  some  portion  of  the  products  obtained  from  the 
productive  service  of  the  capital  loaned. 

Another  remark  also  requires  attention.  In  the  state- 
ment of  the  distribution  of  wealth  to  different  classes  of 
producers,  interest  is  defined  as  the  remuneration  for  the 
use  of  capital,  paid  by  some  one  employing  it  to  the  owner 
or  capitalist,  and  thus  interest  is  the  same  as  the  profits  of 
capital.  But  as  the  term  is  generally  used,  it  includes 
not  only  the  remuneration  given  for  the  use  of  capital,  but 
the  premium  of  insurance,  for  the  risk  incurred  by  the  len- 
der of  receiving  again  the  principal,  or  capital  lent.  Hence 
it  is,  that  in  some  nations  both  in  ancient  and  modern  times, 
the  rate  of  interest  has  been  enormously  high.  Hence, 
also,  the  fact,  that  capital  loaned  to  be  employed  in  bran- 
ches of  production  particularly  exposed  to  loss,  bears  a 
higher  interest,  than  when  no  unusual  risk  is  incurred. 
Thus  we  are  told,  that  in  Athens  the  usual  interest  on 
capital  employed  in  navigation  was  60  per  cent.  But  of 
this  per  centage,  it  is  supposed  by  Say,  that  not  more 
than  three  or  four  per  cent  was  paid  as  a  remuneration  for 
the  use  of  capital.  The  remaining  part  was  a  premium 
of  insurance.  It  is  to  be  noticed  then,  that  in  the  inquir- 
ies on  which  it  is  now  proposed  to  enter,  relating  to  the 
diflferent  causes  which  affect  the  rate  of  interest,  I  look 
only  at  what  is  paid  as  a  remuneration  for  the  use  of  cap- 
ital ;  so  that  the  term  interest,  as  here  used,  expresses 
the  same  as  the  profits  of  capital.     The  rate  of  interest 


PAOFITS  OF  CAPITAL.  *25t 

then  is  the  price  paid  for  the  productive  service  of  cap-  ^ 
ital. 

Upon  what  causes  then  does  the  rate  of  interest  de- 
pend ?  In  answering  this  question,  we  are  not,  as  in  de- 
termining the  rate  of  wages,  to  ascertain  the  cost  price, 
and  then  to  explain  the  variations  from  this  cost  price 
on  the  principle  of  supply  and  demand.  Still,  there  is  in 
this  case  that  which  corresponds  to  the  cost  price, — a 
price,  which  is  looked  upon  in  usual  circumstances  as 
a  fair  equivalent  for  the  productive  service  of  capital  as 
einployed  in  the  common  branches  of  production,  and 
from  which  variations  are  made,  as  those  circumstances 
occur  which  require  them.  Our  first  inquiry  then  relates 
to  this  original,  or  priiiiary  price,  or  equivalent  for  the 
productive  service  of  capital.  Afterwards,  the  causes 
which  tend  to  variations  from  the  original  price  will  be 
brought  to  view. 

For  some  years  after  the  first  settlement  of  a  country, 
the  practice  of  loaning  capital  is  not  introduced.  So  far 
as  capital  is  accumulated  and  made  productive,  it  is  usual- 
ly employed  by  the  capitalist  himself,  who  is  also  per- 
haps a  laborer,  and  thus  receives  w^hat  in  other  circum- 
stances is  paid  as  wages,  interest  and  profits.  But  now 
let  us  suppose,  that  the  individual  who  has  thus  accumu- 
lated capital,  instead  of  employing  his  capital  himself,  en- 
trusts it  to  another  person  to  be  productively  employed, 
and  contracts  to  give  in  return  to  him  who  thus  makes  it 
productive,  a  moiety  of  what  remains  after  the  capital 
which  has  been  productively  consumed,  is  replaced,  and 
the  wages  of  labor  and  other  charges  have  been  paid, — 
that  is,  a  moiety  of  the  net  profits.  In  this  case,  then, 
the  profits  of  the  undertaker  are  united  with  the  profits  of 
22* 


258  POLITICAL    ECONOMY. 

capital,  and  an  equal  division  is  made  ;  and  in  this  way, 
the  amount  received  by  the  capitalist  as  a  remuneration 
for  the  use  of  his  capital  is  determined.  Soon,  however, 
it  is  found  a  preferable  arrangement,  that  he  who  employs 
capital,  instead  of  becoming  an  agent  for  the  owner,  should 
himself  bear  the  responsibility,  and  have  the  entire  control 
and  direction  of  the  business  in  which  he  is  engaged.  He 
receives  then  the  capital  to  be  thus  employed  as  a  loan, 
contracting  to  return  it,  with  an  equivalent  for  its  use,  at 
a  specified  time.  And  now,  in  determining  this  equiva- 
lent, the  parties  interested  are  governed  by  what  was  be- 
fore paid  as  the  proportion  of  the  capitalist.  It  is  in  this 
way,  I  apprehend,  that  the  original  price  paid  for  the  use 
of  capital,  or  the  rate  of  interest,  becomes  established  ;  for 
we  find  it  historically  true,  that  allov/ing  for  what  is  paid 
as  a  premium  of  insurance,  and  for  the  influence  of  other 
causes  of  variation,  the  rate  of  interest  in  most  countries 
is  about  the  same,  as  the  profits  of  those  who  undertake 
^  and  conduct  processes  of  production.  This  is  the  case  in 
the  early  periods  of  national  existence,  when  profits  are 
large,  and  the  rate  of  interest  high,  and  there  is  also  a 
gradual  reduction  of  both,  as  nations  become  older  and 
more  wealthy. 

Supposing  the  usual  rate  of  interest  in  any  country  to 
have  become  established  in  the  manner  that  has  been  sta- 
ted, we  are  now  to  look  at  those  causes,  which  lead  to  va- 
riations in  this  usual  rate.  And  here,  just  as  in  the  varia- 
tions in  the  exchangeable  price  of  commodities,  the  influ- 
ence of  supply  and  demand  is  felt.  Whenever,  from  any 
cause,  the  supply  of  capital  to  be  loaned  exceeds  the  de- 
mand, the  rate  of  interest  will  fall ;  and  when  the  reverse 
occurs,  it  will  rise.     Our  attention  must  then  be  directed 


PROFITS  OP  CAPITAL.  259 

to  whatever  affects  the  relative  supply  and  demand  of 
capital.  And  here  it  becomes  important  to  state  when 
capital  is  in  the  market,  constituting  a  supply,  and  also, 
on  the  other  hand,  what  is  meant  by  a  demand.  Capital 
is  in  the  market,  when  it  is  in  those  forms,  which  admit 
of  its  being  transferred  to  others  to  be  employed  in  pro- 
cesses of  production,  and  when  also  those  holding  it,  are 
disposed  to  yield  to  others  possession  of  it  as  a  loan. 
There  is  a  demand  for  capital,  so  far  as  individuals  are  to 
be  found,  who  are  disposed  to  receive  it  and  able  to  offer 
satisfactory  security  for  its  return  with  the  usual  remune- 
ration for  its  use. 

The  causes,  which  through  the  medium  of  the  relative 
demand  and  supply  of  capital  affect  the  rate  of  interest, 
are  numerous  and  various,  being  connected  both  with  na- 
tional prosperity  and  adversity.  Instead  of  enumerating 
these  causes,  1  offer  the  following  statement  of  principles 
with  a  few  illustrations. 

1.  Advances  in  national  prosperity,  by  increasing  the 
supply  of  capital  in  proportion  to  the  demand,  tend  to  di- 
minish the  rate  of  interest. 

2.  Advances  in  national  prosperity,  by  increasing  the 
demand  for  capital  in  proportion  to  the  supply,  tend  to 
raise  the  rate  of  interest. 

3.  Adverse  circumstances  in  the  condition  of  a  nation, 
by  reducing  the  amount  of  productive  capital,  thus  dimin- 
ishing the  supply  in  proportion  to  the  demand,  may  lead 
to  a  higher  rate  of  interest. 

4.  Adverse  circumstances  in  the  condition  of  a  nation, 
by  diminishing  the  demand  for  productive  capital  in  pro- 
portion to  the  supply,  may  be  followed  by  a  lower  rate  of 
interest. 


fifeb  Political  economy. 

An  illustration  of  the  first  and  second  of  these  princi- 
pleS)  is  found  in  the  economical  history  of  many  nations.  In 
the  early  stages  of  national  existence,  the  productive  en- 
ergies of  the  community  are  usually  brought  into  vigorous 
action,  and,  as  simple  and  frugal  habits  of  living  prevail, 
large  accumulations  of  capital  are  rapidly  made.  And  as 
a  nation  becomes  older,  if  its  prosperity  continue,  accumu- 
lations of  capital  will  continue  to  be  made,  not  so  great 
perhaps  as  at  first,  because  of  the  larger  proportion  of  re- 
venues v^^hich  are  unproductively  spent.  Thus,  then, 
from  the  increase  of  capital  in  every  prosperous  nation, 
there  will  be  a  constant  tendency  to  a  reduction  of  the 
rate  of  interest.  And  if,  as  it  sometimes  occurs,  there  are 
seasons  of  unusual  prosperity,  in  which  rapid  advances  are 
made  in  the  accumulation  of  capital,  there  will  be  a  cor- 
responding tendency  to  a  lower  rate  of  interest.  But  now 
let  us  look  at  the  counteracting  influences,  which  arise 
from  the  same  source.  In  prosperous  nations,  frequent 
discoveries  and  inventions  are  made  in  the  different  branch- 
es of  production,  which  offer  new  forms  of  investing  pro- 
ductive capital ;  and  thus  a  demand  arises  for  a  portion  of 
the  gradually  accumulating  supply.  Enterprise  is  con- 
tinually leading  to  new  branches  of  business,  and  ingenui- 
ty is  devising  new  and  improved  modes  of  production. 
Agricultural  industry  is  enlarging  its  domains,  bringing  new 
tracts  of  land  under  cultivation,  and  rendering  more  fertile 
those  already  subdued.  Manufactures,  in  their  various 
forms,  are  furnishing  new  articles  of  convenience  and  luxu- 
ry, or  offering  at  a  diminished  price  and  in  greater  abund- 
ance, those  before  in  use.  Commercial  industry  also  is 
employed  in  the  discovery  of  new  countries,  and  in  open- 
ng  new  and  profitable  markets.     Thus,  in  connexion  with 


PROFITS  OF  CAPITAL. 


261 


national  prosperity,  an  enlarged  demand  for  capital  is  con- 
tinually arising.  And  hence  it  is,  that  for  many  years, 
during  the  most  thriving  and  vigorous  portion  of  a  nation's 
existence,  when  large  accumulations  of  capital  are  made, 
little,  if  any,  depreciation  of  the  rate  of  interest  is  witness- 
ed. The  larger  supply  is  all  absorbed  by  the  increased 
demand. 

So  far  the  causes,  which  through  the  influence  of  rela- 
tive supply  and  demand  affect  the  rate  of  interest,  are 
connected  with  national  prosperity.  Let  us  now  look  at 
the  effects  of  adverse  circumstances  in  the  condition  of  a 
country.  By  these  adverse  circumstances  I  have  partic- 
ular reference  to  those  events  and  circumstances,  which 
either  prove  destructive  to  capital  already  existing,  or 
prevent  its  further  accumulation.  War  with  its  desolating 
and  withering  influence,  may  sweep  over  a  land,  laying 
waste  its  fields,  its  manufactures,  its  workshops  and  its 
shipping,  consuming  and  destroying  productive  capital, 
wherever,  and  in  whatever  forms  it  may  be  found.  At 
other  times,  the  same  destroyer  of  national  prosperity  may 
be  drawing  out  and  sending  abroad,  in  the  form  of  sub- 
sidies to  foreign  armies,  that  which  is  designed  to  give 
nourishment  and  support  to  industry  and  enterprise  at 
home.  But  while  war  thus  destroys  and  exhausts  the  re- 
sources of  a  nation,  other  more  secret  causes  may  be  at 
work,  undermining  its  greatness.  Of  this  nature,  are  in-' 
temperance  and  luxurious  indulgences  of  every  form. 
Sometimes  also  a  prevailing  propensity  to  wild  and  foolish 
speculation  and  adventure,  will  drain  off  a  portion  of  a  na- 
tion's capital  from  its  more  useful  employment,  proving 
ruinous  to  those  more  immediately  concerned,  and  injuri- 
ous to  the  public  welfare,     Now  it  is  easily  seen,  ths^t 


POLITICAL  ECONOMY. 

these  adverse  circumstances  in  the  condition  of  a  nation, 
as  they  lead  to  the  destruction  of  capital  already  existing, 
and  also  prevent  its  further  accumulation,  must  diminish 
the  supply  of  it  in  the  market ;  and  thus,  should  the  de- 
mand continue  the  same,  the  rate  of  interest  will  rise. 
But  these  same  adverse  circumstances  may  also  eventual- 
ly produce  the  oposite  effect ;  by  diminishing  the  demand 
for  capital,  they  may  lead  to  a  depression  in  the  rate  of  in- 
terest. For  v^^hile  war  destroys  and  consumes  the  pro- 
ductive capital  of  nations,  it  also  draws  off  many  of  their 
inhabitants  from  the  industrious  occupations,  in  which 
they  had  been  previously  engaged.  Many  laborers  it  al- 
so cuts  down  and  brings  to  a  premature  grave.  Intem- 
perance too,  and  other  vicious  indulgences,  impair  the  en- 
ergies, and  prove  injurious  to  the  enterprizing  and  indus- 
trious habits  of  the  laboring  population.  Other  adverse 
circumstances,  connected  with  the  civil  polity  of  a  country 
and  the  administration  of  public  affairs,  lead  to  the  same 
results.  Where  there  is  a  want  of  confidence  in  the  na- 
tional government,  either  as  to  its  stability  or  as  to  the 
wisdom  of  its  measures,  leading  capitalists  to  feel  insecure 
in  their  investments,  or  those  engaged  in  different  pro- 
cesses of  production,  to  fear,  lest  by  some  change  of  pub- 
lic measures  they  may  be  subjected  to  disappointment 
and  loss  in  their  enterprises, — such  want  of  confidence  will 
tend  to  diminish  the  demand  for  capital.  Undertakers 
and  laborers  will  be  less  ready  to  engage  in  the  adventures 
and  labors  of  production,  and  instead  of  a  progress  in  na- 
tional wealth,  the  movement  will  be  retrograde.  All 
these  adverse  circumstances  then,  and  others  of  a  like  na- 
ture^ as  they  tend  to  diminish  the  d^mapd  for  capital  in 


PROFITS  OF  CAPITAL.  263 

proportion  to  the  supply,  will  lead  to  a  fall  in  the  rate  of 
interest. 

From  this  statement  of  the  different  causes  which  affect 
the  rate  of  interest^  it  will  be  readily  seen,  that  here  is  no 
ground,  on  which  conclusions  can  be  made  respecting  the 
prosperity  of  nations.  We  have  seen,  that  the  same  re- 
sults follow  from  directly  opposite  causes.  The  rate  of 
interest  may  be  lower  because  a  nation  has  advanced  in 
prosperity  and  wealth  ; — its  fall  may  also  be  the  sign  of 
national  impoverishment  and  decay.  Again,  the  rate  of 
interest  may  rise  because  the  capital  of  a  country  has  been 
wasted  and  its  resources  exhausted  by  war,  or  by  vicious 
indulgencies  and  ruinous  speculations.  It  may  rise  also 
as  a  nation  becomes  more  prosperous  and  thriving. 

Another  inference  which  we  are  led  to  make,  and  which 
is  supported  by  facts,  is,  that  these  counteracting  and  con- 
flicting causes  will  so  operate,  that  the  variation  of  the 
rate  of  interest  during  a  long  period — a  century  or  more, 
will  be  inconsiderable.  Some  of  the  causes  mentioned, 
or  others  of  a  like  nature,  may  produce  a  temporary  ele- 
vation or  depression,  but  except  a  very  gradual  diminution 
which  attends  the  advancing  age  of  the  nation,  no  per- 
ceptible and  abiding  change  is  effected.  Such  is  the  usual 
course  of  events.  The  discovery  of  a  new  country,  the 
opening  of  a  new  market,  or  the  introduction  of  a  new 
and  important  branch  of  production,  or  any  important 
event  of  rare  occurrence,  will  be  followed  by  unusual  con- 
sequences. 


264  POLITICAL  ECONOMY. 


Ought  the  rate  of  interest  to  he  fixed  hy  legal  enactments  7 

The  inference  stated  in  the  last  paragraph,  leads  us  at 
once  to  the  conclusion,  that  such  interference  on  the  part 
of  the  government  of  a  country  is  unnecessary.  If,  in  the 
usual  course  of  things,  the  average  rate  of  interest  will  re- 
main unaltered  for  many  years,  it  would  seem,  that  this  is 
sufficient  reason,  why  the  government  of  a  country  need 
not  interfere  in  its  regulation.  But  the  principle,  on 
which  the  decision  of  the  proposed  question  should  be 
based,  is  the  following  ; — that  every  member  of  the  com- 
munity has  an  undoubted  right  to  make  use  of  his  own 
property  for  his  own  advantage,  provided,  that  in  so  using 
it  he  does  no  injury  to  others  and  to  the  public  good.  We 
have  seen,  that  the  productive  service  of  capital  is  worth 
more,  and  when  left  to  itself  bears  a  higher  price  at  one 
time  than  at  another.  Now  who  shall  reap  the  benefit  of 
this  advance  in  its  value.  No  one  certainly  has  a  fairer 
claim  to  it  than  the  capitalist,  and  to  deprive  him  of  this 
advantage  by  law,  is  an  unwarranted  infringement  on  his 
/  right  of  property,  unless  it  can  be  shewn,  that  the  public 
good  requires  that  such  restrictions  should  be  imposed. 
And  here  in  fact  is  the  point  at  issue. 

The  laws  of  usury  prohibit  the  capitalist  from  receiving 
more  for  the  productive  service  of  his  capital,  than  a  pre- 
scribed rate  of  interest.  They  do  not,  and  they  cannot, 
secure  to  him  this  amount.  Of  course,  such  laws  are  for 
the  benefit  of  the  borrower  only.  Indeed  it  is  their  pro- 
fessed design  to  secure  the  borrower  against  extortion  on 
the  part  of  the  lender.  Hence  they  are  defended  on  the 
ground,  that  the  public  good  requires,  that  in  the  case  of 


PROFITS  or  CAPITAL.  265 

the  loan  of  capital,  the  exception,  stated  in  the  last  para- 
graph, to  the  great  principle  of  the  right  of  use  of  property, 
should  take  effect.  To  support  this  position,  some  strik- 
ing cases  are  usually  brought  forward.  Suppose,  it  is 
said,  a  young  spendthrift  would  anticipate  his  patrimony. 
He  goes  to  the  money  lender,  and  by  the  offer  of  extrav- 
agant interest  obtains  large  sums,  which  are  soon  squan- 
dered in  vicious  indulgencies.  And  thus,  when  this  heir 
perhaps  of  a  rich  and  ancient  family  succeeds  to  his  ances- 
tral estate,  he  is  broken  down  in  his  constitution  and  im- 
poverished in  his  fortune,  which  has  gone  to  be  added  to 
the  heaps  of  some  sordid  miser.  Or  suppose  some  young 
adventurer  of  sanguine  temperament,  full  of  wild  schemes 
and  half  formed  plans  of  business,  to  be  just  entering  up- 
on his  career.  He  feels  at  once  the  necessity  of  capital, 
of  which  perhaps  he  is  himself  destitute.  He  too  has  re- 
course to  the  money  lender,  and  to  effect  his  purpose, 
makes  to  him  proposals  of  a  rate  of  interest,  three  or  four 
times  larger  than  the  ordinary  profits  of  business  will  en- 
able him  to  pay.  But  this  course  of  rash  and  foolish 
adventure  is  soon  run,  while  ruinous  consequences  result 
to  the  adventurer  himself,  and  to  others,  whom,  perhaps 
by  the  aid  of  the  capital  thus  obtained,  he  has  duped. 
The  public  too  is  injured,  in  what  is  thus  done  to  impair 
credit  and  to  disturb  the  regular  and  prosperous  course  of 
business  transactions.  And  while  all  this  evil  has  been 
sustained,  the  avaricious  capitalist  alone  has  been  bene- 
fitted. Spider  like,  he  has  taken  care  so  to  spread  out  his 
net,  that  the  rash  animal  buzzing  about  him,  shall  become 
his  prey. 

Another  case  is  supposed.     Here  is  an  individual  who 
is  industrious  and  enterprising.     He  is  skilful  in  conduct-^ 
23 


266  POLITICAL  ECONOMY. 

ing  his  business,  and  his  calculations  and  plans  are  cau- 
tiously and  judiciously  made.  But  he  has  been  unfortu- 
nate— has  been  subjected  to  unexpected  losses,  and  is 
threatened  with  bankruptcy  and  ruin.  Still  his  affairs  are 
not  so  desperate  but  that  they  might  be  retrieved.  Could 
he  obtain  a  loan  of  capital  at  the  usual  rate,  his  insol- 
v^ency  might  be  prevented,  and  he  might  be  enabled  to 
provide  for  himself  and  his  family.  In  this  desperate 
state  of  his  affairs,  he  resorts  to  the  money  lender  with  an 
offer  of  extravagant  interest,  and  though  the  day  of  his 
ruin  may  for  a  short  time  be  deferred,  it  is  made  doubly 
sure. 

By  these  and  similar  statements,  designed  to  shew, 
that  the  public  good  requires,  that  such  extortion  with  its 
ruinous  consequences  to  those  immediately  concerned, 
should  be  prevented,  the  policy  of  laws  regulating  the 
rate  of  interest  is  supported.  The  case  is  thought  to  be 
made  out,  that  there  is  reason  for  a  departure  from  the 
principle,  which  it  is  allowed  ought  to  be  recognised  in 
the  use  of  property. 

On  the  other  side  of  the  question,  it  is  said,  that  al- 
lowing the  suppositions  made  to  be  correct,  and  that  such 
instances  of  extortion  occasionally  occur,  they  do  not  justify 
a  violation  of  the  rights  of  property.  The  profligate  mi- 
nor would  probably  waste  his  estate  a  few  years  later, 
should  he  be  prevented  from  so  doing  in  his  minority. 
And  the  rash  adventurer  would  no  doubt  find  some  oth- 
er way,  in  which  he  might  run  his  career  of  folly,  should 
that  which  has  been  described  be  closed  to  him.  And  as 
to  the  unfortunate  individual  whose  affairs  are  embarrass- 
ed, it  will  ordinarily  be  the  case,  that  if  he  is  an  honest 
man  and  his  fortunes  are  not  desperate,  he  will  find  those 


PROFITS  OF  CAPITAL.  267 

who  will  assist  him  on  fair  and  honorable  terms.      If  they 
are  desperate,  it  is  no  object  to  defer  his  bankruptcy. 

It  is  further  said,  that  laws  regulating  interest  are  inju- 
rious to  those  they  are  professedly  designed  to  benefit, 
since  they  increase  the  difficulties  of  obtaining  loans  when 
urgently  needed.  Those  bent  on  dissipation  and  extrav- 
agance, and  determined  to  obtain  loans  at  any  rate,  will 
find  no  difficulty  in  evading  the  laws,  while  the  fact  that 
such  laws  exist,  furnishes  some  pretext  to  the  extortioner 
for  the  course  which  he  adopts.  He  knows,  that  as  a  vi- 
olater  of  law  he  is  liable  to  penalties,  and  looks  upon  a 
part  of  what  he  receives  under  the  name  of  interest,  as  of 
the  nature  of  insurance  for  the  risk  that  he  runs.  As  to 
the  unfortunate  individual  who  is  threatened  with  bank- 
ruptcy, it  is  far  better  for  him,  that  he  should  be  left  to 
obtain  assistance  on  the  most  favorable  terms  he  can  find. 
He  may  be  obliged  to  pay  more  than  the  usual  rate,  but 
such  may  be  his  circumstances,  that  a  loan  thus  obtained 
may  be  advantageous  to  him.  Thus  it  would  be  for  the 
benefit  of  the  borrower  and  of  the  community,  that  no 
laws  should  exist  upon  the  subject,  but  that  the  rate  of 
interest  should  be  determined  by  the  barterings  of  the 
market,  in  the  same  manner  as  the  price  of  commodi- 
ties generally  becomes  fixed.  In  extraordinary  cases — 
when  the  capital  loaned  is  destined  to  be  employed  in 
some  unusually  hazardous  branch  of  business,  or  when 
the  borrower  is  in  embarrassed  circumstances,  and  on 
this  account  the  lender  is  exposed  to  loss,  something  more 
than  the  usual  rate  of  interest  may  be  paid,  not  strictly  as 
higher  interest,  but  as  a  premium  of  insurance.  And  as 
in  this  case  such  transactions  would  be  open  and  fair,  no 
ground    of  complaint    would    be    found.      Still   there 


268  POLITICAL    ECONOMY. 

would  be  a  necessity,  that  some  rules  should  exist  for  the 
adjustment  of  interest  claims  on  debts  long  due,  and 
where  no  terms  had  been  agreed  upon  by  the  parties 
concerned.  Such  cases  would  often  occur  in  the  settling 
of  estates,  and  in  the  balancing  of  long  standing  accounts. 
But  for  all  such  cases,  the  laws  might  provide,  and  yet 
leave  free  the  rate  of  interest  in  the  common  business 
transactions  of  the  community. 

On  Stoclcs  and  Stoch-johhing. 

There  is  a  mode  of  loaning  capital,  which  differs  in 
some  respects  from  the  usual  transactions  of  this  nature 
between  individuals.  It  is  loaning  to  some  public  body 
— the  authorities  of  a  country,  or  a  city,  on  the  condition 
and  with  the  expectation,  that  the  securities  given  for  re- 
payment of  what  is  thus  loaned  may  be  transferred  to 
others,  and  thus  become  what  is  termed  negotiable.  In 
some  cases  also,  there  is  no  expectation  on  the  part  of 
the  capitalist  of  ever  receiving  again  the  principal,  or 
what  is  thus  advanced  as  a  loan.  Public  securities  of  this 
nature  are  called  stocks,  and  in  countries  where  capital  is 
abundant,  trading  in  stocks,  or  stock-jobbing,  often  be- 
comes an  important  branch  of  business. 

Loans  in  this  form  are  preferred  by  capitalists,  I.  Be- 
cause of  the  safety  of  the  investment.  The  public  faith 
is  pledged  for  the  redemption  of  securities  of  this  nature  ; 
and  though  in  some  instances  failures  have  occurred,  cap- 
ital is  thought  more  safe  when  thus  loaned,  than  when  it 
is  in  the  hands  of  private  individuals.  3.  Another  recom^ 
mendation  of  this  form  of  loaning  capital  is,  that  what  is 
thus  loaned  continues  to  be  disposable  property.     He  who 


PROFITS  OP  CAPITAL.  269 

loans  to  an  individual,  usually  places  his  property  loaned, 
for  a  time  at  least,  out  of  his  own  control.  But  stocks 
are  ever  in  the  market,  and  the  owner  of  them  may  at 
any  time  realize  their  value  in  the  currency  of  the  coun- 
try. 3.  A  third  circumstance  which  recommends  public 
securities  to  large  capitalists,  is  the  magnitude  of  the 
transaction  and  the  permanency  of  the  investment.  He 
who  has  his  hundreds  of  thousands  or  his  millions  to  loan, 
is  thus  relieved  from  much  perplexity  and  labor. 

From  these  considerations,  capitalists  are  usually  wil- 
ling to  receive  a  lower  rate  of  interest  on  investments  in  the 
form  of  stocks,  than  on  what  is  loaned  on  private  security. 
And  some  maintain,  that  nnportant  advantages  arise  to  a 
government  from  its  being  indebted  in  this  way  to  the  rich 
and  influential  members  of  a  community,  since  such  indi-  * 
viduals  thus  become  strongly  interested  in  its  support.  On  / 
this  account  it  is  sometimes  said,  that  a  national  debt  is  a 
national  blessing.  England,  whose  debt  is  now  immense, 
is  supposed  to  owe  the  permanency  of  her  institutions  and 
the  stability  of  her  government,  in  no  small  degree,  to 
this  source. 

The  variations  in  the  value  of  stocks,  on  which  the 
stock-jobbing  business  is  based,  arise  from  the  various 
causes,  which  affect  the  stability  of  governments  and  the 
prosperity  of  nations.  The  breaking  out  of  a  revolution, 
or  any  event,  which  brings  a  cloud  over  the  prospects  of 
a  country  and  threatens  it  with  coming  evils,  lowers  the 
price  of  its  stocks.  Again,  the  dawning  of  a  brighter  day, 
in  which  quiet  and  security  and  national  prosperity  are 
looked  for,  is  followed  by  a  corresponding  improvement 
of  public  securities.  All  these  indications  are  early  seen 
•23* 


270  POLITICAL    ECONOMY. 

and  calculated  upon  by  the  stock-jobber,  and  serve  as  the 
basis  of  transactions  in  the  stock  market. 

Important  advantages  arise  to  nations  from  these  trans- 
actions in  those  times  of  difficulty,  when  it  becomes  neces- 
sary to  provide  for  national  defence.  Formerly,  when 
the  liberties  of  a  people,  or  even  their  existence,  were 
threatened  by  a  foreign  foe,  the  reigning  power  was  com- 
pelled to  resort  to  violent  and  often  injurious  measures,  to 
obtain  the  means  of  self  defence.  Private  property  to  a 
great  extent  ceased  to  be  respected, — great  inroads  were 
made  on  the  capital  of  the  nation,  and  serious  injury  done 
to  its  economical  interests.  INow,  the  exigences  of  these 
occasions  are  met  by  a  loan,  and  the  revenues  of  the  na- 
tion for  future  years,  are  pledged  for  the  payment  of  what 
is  thus  obtained  for  its  defence  in  the  hour  of  its  need. 
It  must  however  be  allowed,  that  at  the  same  time  an  at- 
tending evil  has  arisen,  since  these  increased  facilities  for 
obtaining  the  needed  supplies  of  a  time  of  war,  have 
enabled  the  ambitious  and  the  restless,  to  embroil  the  na- 
tions under  their  sway  in  expensive  and  useless  wars. 


CHAPTER  IV. 

Rent,  or  the  profits  of  nattirdl  agency.  ^ 

That  natural  agency  may  become  the  property  of  indi- 
viduals, so  far  as  its  nature  will  admit  of  appropriation;  and 
consulting  the  interests  of  society,  may  be  thus  appropria- 
ted, was  shewn  in  the  chapter  on  Economical  Arrange- 


RENT.  271 

ments.  With  this  proposition,  another  is  closely  connect-  ^ 
ed — that  the  owners  of  natural  agency  are  entitled  to  a 
remuneration  for  its  productive  service.  Hence,  in  the 
distribution  of  the  gross  amount  of  national  products,  a 
portion  is  assigned  to  the  owner  of  land  and  other  natural 
agents ;  and  our  inquiries  in  the  present  chapter  relate  to 
the  principles,  on  which  this  amount  is  determined. 

What  is  received  by  the  owners  of  natural  agency  in 
return  for  its  productive  service,  may  be  termed  the  prof- 
its of  natural  agency  ;  but  if,  as  is  often  the  case,  another 
individual  is  permitted  to  make  use  of  this  productive  ser- 
vice for  his  own  benefit,  the  remuneration  made  to  the 
owner,  is  paid  under  the  name  of  Rent.  Hence,  as  in  the 
case  of  interest  and  the  profits  of  capital,  rent  and  the 
profits  of  natural  agency,  are  to  be  looked  upon  as  the 
same  in  their  nature  and  amount.  I  shall  therefore,  as  it 
is  more  usual  to  speak  of  rent  than  of  the  profits  of  natu- 
ral agency,  make  use  of  the  former  term  in  the  present 
chapter. 

It  will  be  noticed  also,  that  I  treat  principally  of  the 
rent  of  land,  I  do  so,  because  other  kinds  of  natural  agen- 
cy are  comparatively  of  small  importance,  and  the  princi- 
ples applicable  to  land  are  of  general  application.  I  have 
too  in  view,  when  treating  of  the  rent  of  lands,  the  rent 
of  corn  lands,  or  lands  used  in  raising  the  common  agricul- 
tural products  of  the  country. 

And  here  I  would  call  the  attention  to  the  distinction, 
made  in  the  first  chapter  of  this  work,  between  natural 
agency  and  the  aids  of  nature.  In  the  latter  case,  where 
it  is  meant,  that  the  properties  of  material  objects  are  made 
subservient  by  human  ingenuity  and  skill  to  the  work  of 
production,  the  return  for  the  productive  service  of  these 


272 


POLITICAL    ECONOMY. 


aids  of  nature,  is  in  the  form  of  interest,  or  the  profits  of 
capital, — that  is,  the  objects  in  which  these  properties, 
thus  made  useful,  are  found,  are  among  the  different  ob- 
jects, or  forms  which  capital  assumes,  that  it  may  become 
productive.  Hence,  as  in  the  case  of  other  forms  of  in- 
vested capital,  the  remuneration  for  productive  service 
becomes,  as  before  stated,  the  profits  of  capital.  But  in 
instances  where  the  phrase  natural  agency  is  applied,  the 
productive  service  is  rendered  directly  by  the  natural 
y  agent  itself,  and  the  remuneration  for  this  productive  ser- 
vice is  rent,  or  the  profits  of  natural  agency. 

To  illustrate  this  distinction,  we  may  look  at  a  steam 
engine.  In  this  complicated  piece  of  machinery,  the  aids 
of  nature  are  under  various  forms  called  into  use.  Thus 
the  properties  of  the  different  metals  and  woods  employed 
in  constructing  the  machine,  and  of  the  fire  and  water 
used  in  generating  the  steam,  are  all  distinct  instances  of 
the  aids  of  nature,  made  subservient  to  the  purposes  of 
production  by  the  ingenuity  and  labor  of  man.  But  so 
far  as  those  aids  of  nature  can  be  appropriated,  or  any  re- 
turns be  made  to  their  owners  for  the  productive  service 
rendered,  it  is  only  as  the  different  objects  in  which  these 
properties  are  found,  can  be  appropriated.  Hence,  then, 
as  before  stated,  the  objects  in  which  these  useful  proper- 
ties are  found  become  objects  of  value, — forms  in  which 
capital  is  invested,  and  the  remuneration  made  for  the 
service  rendered,  is  the  return  for  the  service  of  capital. 
But  now  look  at  a  tract  of  land,  which  either  itself  by  a 
spontaneous  effort  yields  products  useful  to  man,  or  under 
human  guidance  and  skill  yields  similar  products,  but  in 
greater  abundance  and  of  superior  quality.  Here  is  natu- 
ral agency — a  distinct  species  of  productive  service  claim- 


RENT. 


273 


ing  for  itself  its  own  remuneration,  and  which  is  rendered 
under  the  name  of  rent. 

But  here  instances  may  occur  to  some,  in  which  capi- 
tal is  exchanged  for  land.  An  individual,  who  receives 
an  inheritance  in  the  form  of  money,  gives  it  in  exchange 
for  a  farm.  Hence  it  may  be  thought,  that  as  his  capital 
has  now  assumed  the  form  of  land,  the  return  received 
for  the  productive  service  of  his  farm,  should  be  included 
under  the  head  of  the  profits  of  capital.  But  here  it  is 
to  be  remembered,  that  the  capital,  which  in  the  form  of 
money  has  been  given  in  exchange  for  land,  still  exists  in 
its  original  form  in  the  hands  of  the  individual  to  whom  it 
was  paid,  or  of  some  other  one  who  has  received  it  from 
him,  and,  if  productively  employed,  yields  interest,  or  the 
profits  of  capital.  So  too  the  land  which  has  been  pur- 
chased, yielded  to  its  former  possessor  a  return  for  its  pro- 
ductive service  under  the  form  of  rent,  and  it  continues  to 
yield  the  same  return,  and  under  the  same  name,  to  its 
new  owner.  There  is  then  in  the  community  the  same 
amount  of  capital  paying  interest,  and  of  natural  agency 
paying  rent,  as  before,  the  ownership  of  each  being 
changed. 

And  here  I  remark  incidentally,  that  individuals  are 
often  found,  making  the  exchange  of  money,  or  capital  in 
other  forms,  for  land,  even  when  the  revenue  received  as 
rent  from  the  land  thus  purchased,  falls  short  of  what  is 
received  as  interest  on  the  capital  given  in  exchange  for 
it.  They  are  willing  to  receive  a  smaller  revenue,  either 
on  account  of  the  greater  security  of  property  in  the  form 
of  land,  or  of  the  pleasure  found  in  the  conducting  of  a 
farm,  or  of  the  greater  respect  and  consideration,  which 
in  most  countries  are  attached  to  landholders. 


274  POLITICAL    ECONOMY. 

After  these  preliminary  remarks,  we  are  prepared  to 
enter  on  the  examination  of  the  principles,  on  which  the 
amount  to  be  paid  as  rent,  or  a  remuneration  for  the  pro- 
ductive service  of  land  or  other  natural  agency,  is  deter- 
mined. 

In  newly  settled  countries,  where  are  found  rich  and 
extensive  tracts  of  land,  with  few  to  occupy  and  cultivate 
them,  and  where  most  of  the  inhabitants  are  themselves 
agricultural  producers,  furnishing  supplies  of  this  class  for 
their  own  wants,  though  land  may  be  appropriated,  no 
rents  will  be  paid.  Soon  however,  this  ceases  to  be  the 
case  ;  rents  will  be  paid,  and  as  the  community  continues 
to  make  progress  in  numbers  and  in  wealth,  both  the 
amount  of  land  paying  rent  will  become  greater,  and  the 
rate  of  rents  will  advance,  till  eventually,  no  land  is  found 
within  the  territorial  limits  of  the  nation,  for  which  rent  is 
not  demanded  and  received.  But  as  during  this  progress 
some  lands  yield  a  rent  to  their  owners,  while  others  do 
not,  the  question  arises,  what  leads  to  this  difference  ?  I 
answer,  that  rent  will  be  paid  on  those  lands  from  which 
the  returns  received  are  sufficient  to  pay  the  expenses  of 
their  cultivation  and  to  leave  a  surplus.  The  expenses 
of  cultivation  include  both  the  outlay  of  capital  and  labor 
and  the  usual  profits  of  the  undertaker.  Land  which  does 
not  pay  the  expenses  of  cultivation,  will  of  course  be  left 
uncultivated.  Land  which  pays  these  expenses  and 
nothing  more,  will  not  be  cultivated,  unless  the  owner,  from 
motives  of  convenience,  is  willing  to  forego  remuneration 
for  the  productive  service  of  his  land ;  of  course  it  can 
pay  no  rent.  But,  as  before  said,  land  yielding  a  re- 
turn, which  both  pays  the  expenses  of  cultivation  and 
leaves  a  surplus  as  a  remuneration  for  the  productive  ser- 


RENT.  275 

vice  of  natural  agency,  will  be  cultivated  ;  and  if  occupied 
and  made  productive  by  any  other  person  than  its  owner, 
will  enable  him  who  thus  occupies  and  possesses  it,  to 
pay  a  rent  for  its  use.  Here  then  we  see  what  it  is  which 
lays  the  foundation  of  rent ;  it  is  the  surplus  which  re- 
mains to  the  cultivator  of  land,  after  the  usual  expenses. 
Evidently  then,  in  order  to  determine  the  rate  of  rent,  we 
have  in  the  first  place  to  look  at  the  circumstances,  which 
in  different  cases  will  affect  this  surplus,  and  cause  it  to 
vary  both  in  its  amount  and  its  value. 

And  first  let  us  suppose,  that  rent  is  paid  to  the  owner 
of  land  in  the  form  of  agricultural  products.  In  this  case, 
then,  our  inquiry  respecting  the  rate  of  rent,  assumes  the 
following  form :  What  proportional  part  of  the  agricultural 
products  obtained  by  the  cultivation  of  any  tract  of  land, 
is  to  be  assigned  as  a  surplus  for  the  payment  of  rent  ? 
And  here,  I  know  of  no  better  way  of  stating  the  ques- 
tion, than  by  resorting  to  the  language  of  .Arithmetic. 
Let  us  then  call  the  total  amount  of  products  obtained, 
the  minuend, — the  deduction,  to  meet  the  outlay  of  culti- 
vation and  the  usual  profits  of  agricultural  production,  the 
subtrahend,  and  the  surplus,  or  proportional  part  of  the 
products  respecting  which  we  inquire,  the  remainder. 
Now  then  it  is  evident,  that  whatever  causes  affect  the 
minuend,  making  it  either  greater  or  less,  will  affect  the 
remainder  in  a  corresponding  manner  and  degree.  So 
again,  whatever  causes  affect  the  subtrahend,  making  it 
greater  or  less,  will  in  like  manner  as  before,  affect  the 
remainder.  We  are  then,  in  order  to  determine  the 
amount  of  the  proportional  part  of  products,  which  forms 
the  remainder,  or  surplus,  or  rent  in  kind  of  any  tract  of 
land,  to  look,    1 .  At  the  causes  which  affect  the  total 


276  POLITICAL    ECONOMY. 

amount  of  agricultural  products  obtained  from  the  land, 
and  2.  At  those  causes,  which  affect  the  outlay  of  its  cul- 
tivation and  the  usual  rate  of  agricultural  profits.  And 
at  these  causes,  I  now  propose  to  look. 

Upon  what,  then,  does  the  total  amount  of  products  ob- 
tained from  the  cultivation  of  land  depend  ?  I  answer, 
primarily  and  principally  upon  the  fertility  of  the  soil, 
whether  this  fertility  be  original,  or  whether  it  arise  in 
part  from  the  more  permanent  improvements  of  cultiva- 
tion. Hence  no  doubt  it  is,  that  in  newly  settled  coun- 
tries, the  first  rents  are  paid  for  the  productive  service  of 
the  most  fertile  tracts  of  land.  And  so,  ever  afterwards, 
those  lands  yielding  the  largest  returns  will  continue  to 
pay  the  highest  rents,  unless  other  circumstances  hereafter 
to  be  mentioned,  prevent. 

And  here  I  remark,  that  improvements  of  the  soil  which 
are  of  a  permanent  kind,  after  they  have  once  been  made, 
and  the  capital  and  labor  thus  expended  have  become 
united  with  the  land,  are  ever  after  looked  upon  as  of  the 
nature  of  natural  agency  ;  and  accordingly  a  rent  is  paid 
for  them.  Thus  a  tract  of  land,  which  this  year  yields 
only  sufficient  to  meet  the  expenses  of  its  cultivation,  with 
no  surplus  for  rent,  may  in  a  subsequent  year,  from  tho  I 
permanent  amelioration  and  improvement  of  its  soil,  yield 
a  large  surplus,  and  of  course  pay  a  corresponding  rent. 
The  permanent  improvements  made  upon  it,  raise  it  into 
the  rank  of  superior  soils,  and  its  owner  is  thus  enabled 
to  obtain  a  rent  for  land,  which  otherwise  would  have 
yielded  no  rent. 

We  are  now  to  look  at  those  causes,  which  aflfect  the 
subtrahend,  as  the  case  has  been  stated.  And  here  the 
amount  of  outlay,  both  of  labor  and  capital,  which  is  re 


RENT.  277 

quired  for  the  cultivation  of  the  land  whose  rate  of  rent 
we  are  considering,  is  to  be  taken  into  the  account.  Some 
tracts  of  land  are  far  more  easily  cultivated  than  others. 
The  labor  necessary  to  obtain  from  them  the  annual  crop, 
and  the  amount  of  dressings  and  other  annual  improve- 
ments, are  both  less  than  are  required  by  other  tracts. 
Of  two  farms  of  the  same  number  of  acres,  employed  in 
raising  the  same  kind  of  agricultural  products,  and  yield- 
ing the  same  total  amount,  one  may  be  cultivated  at  an 
expense  less  by  one  third,  than  is  required  for  the  culti- 
vation of  the  other.  It  is  evident  then,  that  in  this  case 
the  remainder,  or  surplus,  which  is  to  be  paid  as  rent,  will 
vary. 

Let  us  now  suppose  equal  amounts  of  products  to  be 
received  from  two  equally  fertile  tracts  of  land,  and  also 
that  the  amount  of  labor  and  of  capital  required  for  their 
cultivation  is  the  same,  but  that  either  wages,  or  the  rate 
of  interest  paid  for  the  capital  employed,  or  both  these 
items  in  the  cost  of  production,  are  for  some  reason  high- 
er in  one  case  than  in  the  other.  Here  again  is  another 
cause,  which  will  affect  the  surplus,  or  remainder  ;  for  if 
the  price,  either  of  labor  or  of  capital,  be  higher,  a  larger 
proportion  of  the  total  amount  of  products  will  be  requir- 
ed for  the  payment  of  these  items,  and  of  course  the  sur- 
plus remaining  will  to  a  corresponding  extent  become  less. 
This  case  is  to  be  carefully  distinguished  from  the  preced- 
ing. In  the  former  case,  the  amount  of  labor  and  capital 
required  for  the  cultivation  of  the  two  tracts  of  land,  was 
supposed  to  vary,  the  price  of  labor  and  of  capital  remain- 
ing the  same.  In  the  latter,  the  variation  is  in  the  price 
of  labor  and  capital,  the  amount  of  each  required  being  the 
same, 

84 


278  POLITICAL    ECONOMY. 

There  yet  remains  one  other  statement  to  be  made. 
What  is  deducted  from  the  whole  amount  to  meet  the 
outlay  of  capital  and  labor,  is  first  received  in  the 
form  of  agricultural  products.  But  to  pay  the  wages  of 
laborers  and  the  interest  of  capital,  it  must  be  sold.  But 
it  m?iy  be,  that  the  price  of  agricultural  products  is  less  in 
the  region  where  one  of  these  tracts  of  land  is  situated, 
than  in  the  neighborhood  of  the  other.  Here,  then,  sup- 
posing the  total  amount  of  products  in  the  two  cases  to 
be  the  same,  and  also  that  both  the  amount  and  the  price 
of  labor  and  capital,  required  for  the  cultivation  of  the 
two  tracts  of  land,  are  the  same,  there  still  is  ground  for  a 
difference  in  the  surplus,  arising  from  a  difference  in  the 
price  of  agricultural  products. 

To  bring  the  different  circumstances  which  have  now 
been  enumerated  into  one  view,  I  offer  the  following  il- 
lustration ; 

A.  and  B.  are  two  landholders,  who  possess  tracts  of 
land  of  the  same  number  of  acres,  situated  in  neighboring 
towns.  We  will  suppose  the  land  of  each  to  be  occupi- 
ed by  tenants,  and  to  be  used  in  raising  the  same  kinds  of 
agricultural  products,  on  the  condition,  that  the  rent  to  be 
paid  in  both  cases,  is  the  surplus,  which  remains,  after 
the  expenses  of  cultivation  and  the  usual  profits  of  farm- 
ing have  been  deducted  from  the  total  amount  of  products 
raised.  The  following  are  circumstances,  which  may 
cause  a  variation  in  the  amount  of  this  surplus. 

1.  Owing  to  a  difference  in  the  feriility  of  the  two 
tracts  of  land,  the  total  amount  of  products  obtained  from 
one  of  them  may  be  greater  than  that  received  from  the 
other. 

2.  The  cultivation  of  one  farm  may  be  easier  and  less 


RENT.  279 

expensive,  than  the  cultivation  of  the  other,  requiring 
less  labor  and  capital. 

3.  Supposing  the  amount  of  labor  and  of  capital  requir- 
ed in  the  two  cases,  to  be  the  same,  the  rate  of  wages  or 
of  interest  may  vary. 

4.  There  may  be  a  difference  in  the  price  obtained  for 
the  portion  of  the  agricultural  products,  sold  to  meet  the 
expenses  of  cultivation. 

It  has  been  shewn,  that  each  of  these  four  circumstan- 
ces may  lead  to  a  variation  in  the  surplus,  which  is  to  be 
paid  as  rent.  I  should  also  add,  that  should  there  be  any 
difference  in  the  profits  of  agricultural  production  in  the 
two  towns,  here  will  be  another  circumstance  leading  to 
the  same  result.  But  ordinarily,  it  will  be.  the  case,  that 
in  the  same  neighborhood,  the  pi*ofits  of  the  same  branch 
of  industry  will  not  vary. 

In  the  statements  which  have  been  made,  it  has  been 
supposed,  that  the  remuneration  made  for  the  productive 
service  of  land,  is  a  certain  proportional  part  of  the  pro- 
ducts raised  by  him,  who  occupies  and  cultivates  the  land. 
But  rent  is  more  frequently  paid  in  the  form  of  money. 
Here  then  we  are  still  further  to  take  into  the  account 
those  circumstances,  which  affect  the  price  of  agricultural 
products  ;  for  if  the  price  of  commodities  is  high,  the  sur- 
plus, which  is  appropriated  for  the  payment  of  rent,  will 
be  sold  for  a  larger  sum.  On  the  contrary,  if  the  price 
of  agricultural  products  is  low,  the  rent,  if  paid  in  money, 
must  to  a  corresponding  degree  be  reduced. 

The  price  of  agricultural  products  is  determined  by  the 
same  principles,  as  regulate  the  price  of  other  commodi- 
ties ;  and  these  principles  have  already  been  brought  to 
view  in  the  former  part  of  this  work.     But  there  is  one 


280  POLITICAL    ECONOMY. 

circumstance  pertaining  to  agricultural  products,  which  In 
this  connexion  requires  a  distinct  consideration.  I  refer 
to  their  vicinity  to  a  market.  Products  of  this  class  are 
for  the  most  part  bulky  and  some  of  them  perishable. 
Hence  they  are  with  difficulty  and  with  much  expense 
transported  to  a  distance,  so  that  from  this  cause  their 
price,  or  value  when  exchanged  for  money,  will  be  much 
affected.  This  consideration,  it  will  be  remembered,  has 
already  come  to  view,  as  one  of  the  circumstances,  deter- 
mining the  surplus,  or  remainder,  which  itself  is  rent,  if 
rent  be  paid  in  kind.  It  is  again  to  be  regarded,  now 
that  this  surplus  is  to  be  exchanged  for  money,  with 
which  the  payment  of  rent  is  to  be  made. 

The  circumstance  then  of  proximity  to  a  market,  be- 
comes of  leading  importance  among  those  causes,  which 
determine  the  rate  of  rent.  Such  is  the  result  to  which 
we  are  led  by  our  reasonings,  and  this  result  is  fully  cor- 
roborated by  facts.  It  is  well  known  that  a  farm  in  the 
neighborhood  of  a  sea-port  town,  or  any  populous  city,  is 
rented  at  a  much  higher  rate,  than  a  farm  of  equal  extent  and 
fertility  in  the  interior  of  the  country,  far  removed  from  a 
market.  Hence  also  it  is,  that  the  opening  of  a  canal,  or 
a  railway,  connecting  a  part  of  the  interior  of  a  country 
with  its  principal  towns,  affects  the  rate  of  rent  through- 
out the  whole  region  in  which  it  is  located.  And  still 
further,  it  is  on  this  account,  that  the  rate  of  rent  is  some- 
times affected  by  the  kind  of  agricultural  product,  to  the 
raising  of  which  a  farm  is  adapted.  Thus  a  tract  of  land 
in  the  interior  of  a  country,  which  is  well  adapted  to  the 
raising  of  sheep,  may  yield  a  small  rent  to  its  proprietor, 
when  other  lands  in  the  same  neighborhood  better  suited 
to  the  raising  of  grain,  will  pay  no  rent. 


KENT.  281 

I  have  now  only  to  add  to  all  the  other  circumstances, 
which  have  been  mentioned  as  affecting  the  rate  of  rent, 
the  influence  of  supply  and  demand.  But  it  will  here  be 
noticed,  that  the  rate  of  rent  thus  far  considered,  is  what 
may  be  called  the  natural  price  of  the  productive  service.^ 
of  land, — what  corresponds  to  the  cost-price,  as  this  term 
is  applied  to  other  commodities.  So  far  then  as  supply 
and  demand  produce  variations  from  this  natural  price,  he 
who  takes  a  lease  of  the  land,  gives  more  or  less  than  he 
can  afford  to  give,  paying  the  expenses  of  cultivation  and 
retaining  for  himself  the  usual  profits  of  agricultural  pro- 
duction. Hence  then  it  will  be  inferred,  that  the  effect 
of  supply  and  demand  on  the  rate  of  rents,  will  be  restricted 
to  narrow  limits,  especially  so  far  as  this  influence  tends 
to  raise  the  rate  of  rents  ;  for  in  proportion  as  the  profits 
of  agricultural  production  are  thus  raised,  the  motive  to 
take  leases  of  land  and  engage  in  this  department  of  pro- 
duction, is  diminished.  I  will  merely  add  on  this  topic, 
that  by  supply,  is  meant  the  amount  of  land,  which  land- 
holders are  willing  to  lease  to  others  on  fair  and  reasonable 
terms,  and  by  demand,  the  applications  for  land  to  be 
thus  occupied  and  cultivated. 


'ibtd'^ 


"^^<^ittbmift. 


282 


CHAPTER  V. 

Profits  of  the  Undertaker. 

Of  the  several  portions,  into  which  the  gross  products 
of  a  nation  are  primarily  distributed,  one  yet  remains  to 
be  considered — the  profits  of  the  undertaker,  or  manager. 
The  term  profits,  is  applied  to  the  returns  yielded  both  to 
the  landholder  and  the  capitalist  for  the  productive  ser- 
vice of  land  and  capital.  Thus  we  speak  of  the  profits  of 
land,  and  also  of  the  profits  of  capital.  But  when  the 
word  profits  is  used  alone,  it  is  to  be  understood  as  denot- 
ing the  profits  of  the  undertaker.  If  the  same  individual, 
who  undertakes  and  manages  a  process  of  production,  is 
the  owner  of  the  capital,  or  of  the  land  employed,  then 
the  profits  of  the  undertaker  will  be  united  with  the  profits 
of  the  capitalist,  or  of  the  landholder.  But,  as  is  some- 
times the  case,  if  the  undertaker  possesses  neither  capital 
nor  land,  but  obtains  both  from  others,  paying  interest 
and  rent,  then  the  portion  which  he  receives  becomes  dis- 
„A  tinct,  being  the  remuneration  for  the  productive  service 
which  he  renders. 

If  now  we  look  at  the  nature  of  the  productive  service 
thus  rendered  by  the  undertaker,  we  find  that  it  is  labor 
V  of  a  peculiar  kind  and  accompanied  with  varying  degrees 
-^  of  responsibility  or  trust.  In  considering  then  the  re- 
muneration made  for  this  kind  of  productive  service,  we 
are  naturally  led  to  direct  our  attention  to  the  two  partic- 
ulars mentioned — the  labor  and  the  responsibility.  But 
so  far  as  profits  include  a  remuneration  for  labor,  we  are  in 


283 

determining  the  rate  of  profits  to  be  guided  by  the  same 
general  principles  as  regulate  the  wages  of  common  labor. 
And  here,  to  learn  the  modifications  and  exceptions  of 
these  principles,  we  may  look  at  the  influence  of  supply 
and  demand,  more  especially  at  those  causes,  which  limit 
the  supply  and  thus  tend  to  raise  the  price  of  this  species  of 
labor.  The  most  important  of  the  causes  are  the  follow- 
ing ;  1 .  The  undertaker  must  be  able  to  furnish  from  his 
own  resources,  or  to  obtain  from  others  on  his  good  cred- 
it, the  capital  which  he  needs.  To  do  this,  he  must  ei- 
ther possess  property  himself,  or  sustain  a  reputation  for 
intelligence,  good  management  and  honesty.  This  cir- 
cumstance tends  in  no  small  degree  to  limit  the  supply. 
2.  There  is  further  needed  to  constitute  a  good  underta- 
ker, a  combination  of  qualities,  rarely  found  united  in  the 
same  individual.  He  should  possess  an  unusual  share  of 
foresight  and  calculation,  that  his  plans  may  be  well  laid. 
He  must  also  exhibit  perseverance  and  constancy  of  pur- 
pose in  carrying  his  plans  into  execution.  Often  too  he 
is  called  upon  to  superintend  and  direct  the  efforts  of  oth- 
ers, and  to  execute  this  office  well,  he  needs  both  discre- 
tion and  decision  of  character.  There  is  required  also, 
to  conduct  some  branches  of  production  successfully,  much 
knowledge,  both  of  the  state  of  the?  world  generally,  and 
of  the  details  of  particular  employments  and  pursuits. 
Now  all  these  various  requisites  tend  to  limit  the  supply, 
and  consequently  to  raise  the  rate  of  the  remuneration  of 
this  species  of  productive  service ;  and  were  there  no 
other  circumstances  to  be  taken  into  the  account,  this  li- 
mitation of  the  supply,  would  alone  lead  to  an  important 
difference  between  the  wages  of  the  common  laborer  and 
of  the  undertaker.  


r 


284  POLITICAL    ECONOMY. 

We  are  next  to  look  at  the  responsibility  which  rests 
upon  the  undertaker.  This  responsibilty  is  often  great, 
arisirig  in  part  from  the  amount  of  property  concerned, 
and  in  part  from  the  risk  of  success  ;  and  it  is  thought 
reasonable,  that  a  remuneration  should  be  received  for  its 
assumption,  proportional  to  its  greatness.  But  in  this 
case,  from  the  nature  of  the  circumstances  to  be  regarded, 
it  is  difficult  by  the  application  of  any  principles,  to  meas- 
ure the  influence  which  will  be  exerted  on  the  rate  of 
profits  ;  still  the  effects  of  this  cause  are  recognised  and 
deemed  important.  Here,  indeed,  is  one  principal  ground 
of  distinction  between  the  rate  of  profits  in  different 
branches  of  production.  Thus  the  labor  of  the  agricultu- 
ral undertaker  is  usually  more  toilsome  and  longer  contin- 
ued, than  that  of  the  commercial  undertaker,  but  if,  as  is 
usually  the  case,  the  amount  concerned  and  the  risk  run, 
be  much  greater  in  the  latter  instance  than  in  the  former, 
the  profits  will  be  proportionally  higher. 


CHAPTER  VI. 

Fees  and  Salaries. 


In  the  preceding  chapters,  the  attention  has  been  di- 
rected to  the  distribution  of  wealth  among  the  different 
classes  of  productive  laborers,  in  the  form  of  wages,  inter- 
est, rent  and  profits.  This  may  be  regarded  as  its  primary 
distribution.  It  is  still  further  apportioned  out  to  other 
classes  of  the  community,  who,  though  unproductively 


FEES. 


285 


employed,  as  that  term  has  been  defined,  are  still  contrib- 
uting to  the  enjoyments  and  prosperity  of  the  nation. 
These  unproductive  classes  receive  a  remuneration  for  their 
services,  under  the  name  of  fees,  salary,  and  sometimes 
the  more  general  term  compensation  ;  and  it  is  proposed, 
in  this  chapter,  to  consider  the  further  distribution  of  wealth, 
as  it  is  affected  in  these  different  ways. 


Of  Fees. 

By  a  fee,  is  meant  a  recompense  for  services  rendered, 
the  amount  of  which  is  either  determined  by  law,  or  by 
the  agreement  of  those  interested.  It  is  in  this  form,  that 
the  revenues  of  lawyers  and  physicians  are  received,  and 
also  of  some  public  functionaries. 

Legal  Fees,  The  compensation  of  most  public  function- 
aries, and  in  some  instances  of  lawyers,  is  fixed  by  statute. 
The  services  thus  rendered  are  acts  of  civil  power,  and 
those  who  render  them  are  to  be  regarded  as  agents,  by 
whose- instrumentality  the  authority  of  the  State  is  brought 
to  the  aid  of  individuals  in  their  private  transactions. 
Hence  the  propriety  of  determining  their  compensation 
by  law,  and  hence  also  a  portion  of  what  is  thus  received, 
usually  goes  under  some  form  into  the  public  treasury. 
It  is  also  obvious,  that  this  course  is  not  only  reasonable 
and  just  on  the  part  of  the  government,  but  beneficial  to 
those,  by  whom  these  public  agents  are  employed  and 
paid.  For  otherwise,  since  services  of  this  nature  are  by 
law  made  absolutely  essential  in  many  instances,  it  would 
be  in  the  power  of  those  by  whom  they  are  performed, 
to  make  exorbitant  exactions  of  their  employers.     I  refer 


286  POLITICAL    ECONOMY. 

in  this  remark  to  conveyances,  writs  and  other  legal  in- 
struments. 

In  determining  the  amount  of  legal  fees  in  different  ca- 
ses, the  government  is  accustomed  to  take  into  considera- 
tion the  nature  of  the  service  rendered,  as  it  is  difficult  or 
easy — the  responsibility  incurred,  and  the  time  occupied. 
Reference  is  also  had  to  constancy  of  employment  ; — for 
an  occasional  service  the  fee  is  higher,  than  for  one  of 
more  frequent  recurrence,  especially,  if  for  the  perform- 
ance of  this  occasional  service  it  be  necessary  to  support 
an  expensive  establishm  nt,  or  to  refrain  from  other  em- 
ployments. The  rate  of  legal  fees,  will  also  be  affected 
to  some  extent  by  the  prevailing  style  and  expenses  of 
living,  in  different  sections  and  parts  of  the  country. 

Customary  Fees.  In  by  far  the  greater  number  of  in- 
stances, the  fees  of  professional  men  are  determined  by 
custom,  that  is,  by  a  rate  of  compensation,  which  is  the 
common  or  prevailing  remuneration  of  similar  services  in 
the  neighborhood,  or  through  the  same  section  of  the 
country.  Thus,  though  the  fees  of  lawyers  and  physi- 
cians in  the  city  and  in  the  country,  or  in  the  remote 
parts  of  the  same  national  territory,  may  differ,  an  aver- 
age rate  is  in  each  instance  found,  and  such  are  called 
customary  fees. 

The  principles,  on  which  the  amount  of  the  customary 
fees  of  professional  services  is  determined,  are  evidently 
the  same,  as  relate  to  the  wages  of  productive  laborers  ; — 
we  are  to  look  at  the  cost  of  production,  and  at  the  modi- 
fying influences  of  supply  and  demand.  But  the  cost  of 
production  in  this  case,  relates  not  only  to  the  expenses 
of  living  ;  it  includes  also  the  time  and  capital  expended 
by  professional  men,  preparatory  to  the  services  which 


FEES.  287 

they  render.  It  should  also  be  remembered,  that  the 
permanency  of  the  investment  is  in  this  case  dependent 
on  the  continuance  of  life ;  and  hence,  the  rate  of  interest 
to  be  received,  should  be  calculated  on  the  principles  of 
life  annuities. 

The  risk  of  success  is  another  circumstance,  which  is 
taken  into  account  in  determining  the  average  compensa- 
tion of  professional  services.  Of  those  who  enter  on  this 
course  of  life,  some  fail  to  acquire  the  confidence  of  the 
public,  and  to  find  employment  adequate  to  their  support. 
The  want  of  mental  capacity,  or  some  peculiarity,  either 
in  the  constitution  of  their  minds  or  in  their  habits,  dis- 
qualifies them  for  rendering  the  services  required,  and 
they  are  compelled  to  abandon  the  undertaking  with  the 
loss  of  their  time  and  capital.  This  risk  of  success  then, 
entitles  those  who  succeed  to  a  higher  remuneration. 

Extra  Fees.  Individuals  in  the  different  professions  are 
accustomed  to  receive  extra  fees,  as  a  remuneration  for 
their  services — that  is,  a  compensation  over  and  above  the 
customary  rate  ;  and  it  is  well  understood,  that  the  com- 
pensation in  such  cases  is  for  services  of  a  superior  order. 
What  is  thus  paid  in  excess  of  the  customary  fee,  may 
either  be  looked  upon  as  a  gratuity  on  the  part  of  him  by 
whom  it  is  paid,  evincing  his  confidence  in  the  superior 
powers  and  attainments  of  the  individual  employed  by 
him,  or  as  the  higher  price  of  a  commodity,  arising  from 
its  limited  supply  ;  since  the  services  of  one  who  is  dis- 
tinguished as  a  lawyer,  or  physician,  will  be  in  extensive 
demand,  and  thus  the  price  of  such  services  will  be  en- 
hanced by  competition. 

It  is  evidently  for  the  public  good,  that  the  services  of 
professional  men  should  in  this  way  be  left  to  command 


288  POLITICAL    ECONOMY. 

any  price,  which  those  making  use  of  them  are  disposed 
and  able  to  pay.  Were  it  otherwise,  the  strong  motive, 
which  now  exists  to  make  those  attainments  and  acquire 
that  superiority,  which  it  is  highly  important  to  the  pub- 
lic should  be  found  among  its  professional  laborers,  would 
be  wanting.  It  is  also  generally  the  case,  that  this  supe- 
riority has  been  attained  by  many  years  of  painful  and 
strenuous  effort,  and  perhaps  of  a  large  outlay  of  capital, 
or  it  is  the  result  of  much  experience — the  long  practice 
of  a  profession,  and  by  one,  who  has  been  gifted  by  na- 
ture with  more  than  ordinary  powers.  In  this  view, 
then,  there  is  a  well  founded  claim  for  higher  compensa- 
tion. 

What  has  now  been  said  on  the  subject  of  fees,  may 
tend  to  remove  a  prevailing  impression,  that  the  services 
of  professional  men  receive  an  extravagant  compensation. 
So  far  as  the  rate  of  fees  is  fixed  by  statute,  if  they  are 
too  high,  it  is  manifestly  the  fault  of  the  government ; 
for  the  fee  thus  paid  is  of  the  nature  of  a  tax  imposed  by 
the  government  on  its  subjects.  So  far  as  the  rate  of  fees 
is  customary,  it  rests  on  the  same  principles,  by  which 
the  wages  of  productive  laborers  are  determined.  So  far 
as  fees  are  above  the  customary  rate,  they  are  a  gratuity, 
which  it  is  for  the  advantage  both  of  the  public  and  of 
those  more  immediately  interested,  should  be  given.  In 
neither  case,  then,  is  there  ground  of  complaint.  It  is 
further  to  be  considered,  that  if  some  professional  men 
acquire  wealth  by  their  labors  ;  many  remain  poor,  and 
not  a  few  are  compelled  to  abandon  the  course  of  life, 
they  have  attempted  to  pursue.  In  this  view  of  the  sub- 
ject, the  average  compensation  of  professional  labor  is  far 
from  being   extravagant.     Besides,  it  is  to  be  remember- 


SALARIES.  289 

ed,  that  what  is  paid  to  the  lawyer,  or  the  physician,  for 
a  service  rendered  in  five  or  ten  minutes,  perhaps  only  a 
few  words  of  advice,  is  not  simply  a  remuneration  for  the 
time  and  effort  required  to  give  this  advice,  hut  for  what 
it  has  cost  to  attain  the  knowledge  and  skill,  necessary  to 
give  it,  and  for  the  responsibility,  which  is  in  this  way  as- 
sumed. 

Salaries, 

A  salary  is  a  fixed  compensation  for  labor,  paid  at  sta- 
ted periods.  It  implies  a  stipulation  on  the  one  part  to 
render  certain  services,  and  on  the  other,  to  pay  in  a  form 
and  at  times  specified,  a  certain  amount  of  value.  If,  in 
the  agreement  thus  made,  nothing  is  said  of  the  form  in 
which  the  salary  is  to  be  paid,  it  is  understood  to  be  in  the 
currency  of  the  country.  Sometimes  also  the  times  of 
payment  are  not  specified,  but  are  left  to  be  regulated  by 
the  prevailing  custom,  which  may  be  to  pay  annually, 
semi-annually  or  quarterly. 

And  here  ii  may  be  asked,  why  in  certain  instances  the 
services  of  professional  men  are  remunerated  in  this  form, 
while  in  other  cases  a  fee  or  daily  compensation  is  given  ? 
The  ground  of  distinction  is,  that  where  a  salary  is  paid, 
the  services  thus  remunerated  are  rendered  to  the  public, 
or  to  siJme  associated  portions  of  it,  and  in  other  instances 
to  an  individual.  It  is  true  that  the  public,  and  the  soci- 
ety thus  receiving  the  services  of  the  professional  laborer, 
is  made  up  of  individuals,  who  are  thus  benefitted  in  their 
individual  capacity,  still  he  who  is  thus  employed,  minis- 
ters to  the  whole  community,  and  each  one  avails  himself, 
so  far  as  he  pleases,  of  the  assistance  afforded.  Thus 
25 


290  POLITICAL  ECONOMY. 

the  teacher  of  a  school,  or  of  a  religious  society,  is  in  the 
employment  of  the  whole  school,  or  society  ;  still,  it  is  as 
individuals,  that  the  members  of  these  communities  derive 
benefit  from  their  services. 

In  looking  at  the  nature  of  this  mode  of  remunerating 
professional  services,  it  will  be  seen,  that  it  is  in  the  stip- 
ulation to  pay  a  definite  sum  at  stated  periods,  more  than 
in  any  other  respect,  that  it  differs  from  remuneration  in 
other  forms.  At  least,  the  principles  on  which  the 
amount  of  salary  is  determined,  are  the  same.  There  is 
a  reference  to  the  cost  of  production,  that  is,  to  the  ex- 
penses of  living  in  the  style,  which  prevails  in  similar 
classes  of  the  community.  The  expenses  of  education, 
including  the  outlay  both  of  time  and  capital  in  preparing 
to  render  the  services  specified,  are  also  taken  into  the 
account,  and  the  return  for  this  outlay  is  calculated  on 
the  principles  of  a  life  annuity.  In  particular  instances 
also,  great  endowments  and  uncommon  attainments  com- 
mand a  salary  which  exceeds  the  usual  rate. 

The  principal  advantages  which  arise  from  this  form  of 
compensation,  are  the  following ;  On  the  part  of  the  em- 
ployers, it  gives  a  command  over  the  services  of  those 
employed  by  them  for  an  extended,  perhaps  an  unlimited 
period,  which  in  many  instances  it  is  highly  important  to 
acquire.  On  the  other  hand,  it  enables  those  who  are 
thus  remunerated,  to  make  their  calculations  and  Arrange- 
ments, both  as  to  their  means  of  support,  and  the  employ- 
ment of  their  time  and  the  direction  of  their  energies, 
with  greater  definiteness  and  certainty.  The  public  also 
are  benefitted,  for  when  men  have  before  them  stations  of 
usefulness  and  of  competency,  if  not  of  affluence,  to 
which  they  may  aspire,  they  are  led  to  make  greater  ef- 


SALARIES.  291 

forts  and  seek  higher  attainments,  than  would  otherwise 
be  the  case  ;  and  thus,  whether  those  thus  remunerated 
are  public  officers,  or  professional  laborers,  the  communi- 
ty is  more  ably  and  faithfully  served. 

But  with  these  advantages  of  salaries,  some  disadvan- 
tages are  also  connected.  When  a  stipulated  sum  is  to 
be  paid  year  after  year,  inconveniences  sometimes  arise, 
either  from  changes  in  the  circumstances  of  contracting 
parties,  or  from  variations  in  the  value  of  the  compensa- 
tion ;  and  these,  inconveniences  may  affect  both  those  by 
whom  a  salary  is  paid  and  by  whom  it  is  received.  Some- 
times, those  bound  to  the  payment  of  a  salary,  become 
unable  to  fulfil  their  engagements  without  embarrassment 
and  loss.  On  the  other  hand,  those  to  whom  payment  in 
this  form  is  made,  find  that  their  calculations  as  to  the  ex- 
pense of  living  have  been  erroneous,  and  that  the  amount 
which  they  receive  is  inadequate  to  their  support.  In 
such  cases,  the  happiness  and  usefulness  of  those  concerned 
may  require,  that  the  agreements,  thus  entered  into,  should 
mutually  be  given  up,  and  new  arrangements  made. 

It  is  sometimes  stipulated,  that  salaries  shall  be  paid, 
in  whole,  or  in  part,  in  other  commodities  than  money. 
In  judging  of  the  expediency  of  arrangements  of  this  na- 
ture, we  may  apply  the  principles  stated  in  the  former  part 
of  this  work  on  the  subject  of  price.  If  the  commodity,  in 
which  it  is  stipulated  that  payment  shall  be  made,  be  one 
of  prime  necessity,  as  wheat,  or  any  other  agricultural  pro- 
duct in  general  use,  the  value  of  the  compensation,  though 
subject  to  occasional  variations,  will  remain  nearly  the 
same  for  many  years.  If  the  commodity  be  of  a  differ- 
ent kind — an  article  of  luxury,  either  manufactured  or  ag- 
ricultural, the  changes  of  value  will  be  greater  and  more 


292  POLITICAL  ECONOMY. 

permanent.  Of  this  we  have  an  example  in  the  celebra- 
ted case  of  the  Virginia  clergy  against  their  parishioners. 
The  latter  had  stipulated  to  pay  the  salaries  of  the  former 
in  tobacco  ;  but  it  was  found,  after  a  few  years,  that  the 
value  of  this  commodity  had  become  greater,  and  it  was 
contended,  on  the  part  of  the  parishioners,  that  they  were 
bound  only  to  the  payment  of  an  equivalent  of  the  price 
of  tobacco,  at  the  time  the  contract  was  made.  And 
here,  it  may  be  noticed,  that  the  value  of  salaries  thus 
payable  in  agricultural  products,  will  generally  increase. 

But  at  the  present  day,  salary  contracts  are  generally 
paid  in  the  circulating  medium  of  the  country  ;  hence  va- 
riations in  the  value  of  salaries  arise  from  alterations  in  the 
relative  value  of  money  and  other  commodities,  or,  which 
is  the  same  thing,  from  changes  in  the  price  of  commodi- 
ties. I  have  incidentally  referred  to  this  subject  in  a 
preceding  chapter,  and  shall  here  briefly  state  and  apply 
two  propositions,  the  correctness  of  which  has  before  been 
shewn.  1.  Money  from  variations  in  the  cost  of  its  pro- 
duction,— from  its  comparative  plenty  and  scarceness  at 
different  periods,  and  also  from  the  changes  of  its  denom- 
inations, is  subject  to  fluctuations  of  value,  so  that,  sup- 
posing the  value  of  other  commodities  to  remain  the  same, 
their  price,  as  affected  by  variations  in  the  value  of  mon- 
ey, will  alter.  2.  The  value  of  those  commodities  which 
supply  the  common  wants  of  life,  is  ever  subject  to  chan- 
ges, so  that,  supposing  the  absolute  value  of  money  to  re- 
main the  same,  its  relative  value  to  other  commodities, 
and  of  course  the  price  of  these  commodities,  will  be 
continually  fluctuating.  Now,  as  the  value  of  any  fixed 
compensation  will  evidently  depend  on  the  price  of  arti- 
cles for  which  it  is  exchanged,  it  is  evident,  that  here  is 


SALARIES. 


293 


an  inconvenience,  to  which  those  who  receive  their  in- 
come in  the  form  of  salary,  must  ever  be  subject.  Some- 
times, the  different  causes  of  variation  in  value  which 
have  been  stated,  will  counteract  each  other,  and  then 
the  change  will  be  slight ;  in  other  instances,  they  con- 
spire to  produce  the  same  result,  and  thus  essentially 
raise  or  depress  the  value  of  salaries.  And  here  it  may 
be  remarked,  that  in  the  progress  of  society,  there  is  ever 
a  tendency  to  higher  prices  of  the  more  common  and 
essential  commodities  of  hfe,  the  demand  becoming  great- 
er in  proportion  to  the  supply  as  population  increases. 
There  is  also  a  tendency  in  the  progress  of  a  nation  to  a 
higher  and  more  expensive  style  of  living. 

Whenever,  in  the  different  ways  now  stated,  the  price 
of  commodities  has  varied,  or  other  facts  and  circumstan- 
ces have  occurred,  which  essentially  affect  the  value  of  a 
fixed  compensation,  the  principles,  on  which  the  contract 
was  originally  formed,  evidently  justify  and  require,  that 
a  corresponding  alteration  in  the  salary  should  be  made. 
Sometimes,  indeed,  the  amount  of  salary  to  be  received 
is  based  upon  the  price  of  the  common  articles  of  domes- 
tic consumption,  and  it  is  stipulated,  that  a  rise  in  the 
prices  of  these  commodities  shall  be  followed  by  a  cor- 
responding increase  of  salary  ;  and  where  no  stipulation 
of  this  kind  is  expressed,  it  is  still  evidently  implied. 

It  is  often  objected  to  salaries,  that  those  who  receive 
a  fixed  compensation  will  cease  to  feel  any  strong  motive 
to  effort  and  improvement.  The  incumbent  of  an  office, 
it  is  said,  is  aware,  that  his  support  is  secured  to  him  in- 
dependently of  the  manner  in  which  his  services  are  ren- 
dered, and  may  on  this  account  become  remiss  ;  or  if 
negligence  is  not  found,  no  higher  attainments,  or  increas- 
25* 


394  POLITICAL    ECONOMY. 

ed  ability,  are  sought.  The  force  of  this  objection  is  to 
some  extent  acknowledged,  but  it  may  be  hoped,  that  in 
most  instances,  some  higher  and  better  motive  will  come 
in  to  take  the  place  of  that  which  has  been  removed. 
There  are  also  in  many  cases  prospects  of  preferment. 
Still,  perhaps,  it  might  be  advisable,  wherever  it  is  prac- 
ticable, to  let  the  amount  of  compensation  depend  in  part 
on  the  success  and  ability,  with  which  services  are  ren- 
dered. At  the  same  time  care  should  be  taken,  lest  the 
increased  effort  thus  secured,  be  attended  with  less  fidel- 
ity. 

The  professional  laborers  who  receive  a  compensation 
in  the  form  of  salary,  are  principally  moral  and  religious, 
and  literary  and  scientific  teachers.  In  some  depart- 
ments of  the  civil  service  also,  a  remuneration  is  made  in 
ihis  form,  especially,  where  it  is  deemed  important,  to 
raise  those  thus  employed  above  all  considerations  of  pri- 
vate interest.  Hence  judges,  and  the  most  responsible 
executive  ofiicers,  receive  salaries.  And  not  unfrequent- 
ly  the  situation  of  such  is  rendered  still  more  indepen- 
dent, by  the  stipulations,  that  their  salaries  shall  not  be 
diminished  during  the  tenure  of  office,  which  is  usually 
for  good  behaviour ;  and  sometimes,  when  the  term  of 
ofiice  is  limited,  that  they  shall  neither  be  increased  nor 
diminished.  There  has  of  late  been  a  tendency  in  this 
country,  to  multiply  the  instances,  in  which  public  ser- 
vices are  remunerated  by  salaries.  Thus,  in  many  of 
our  counties,  sheriffs  and  clerks  of  courts,  who  formerly 
have  derived  their  income  from  fees,  now  receive  a  fixed 
compensation,  or  at  least  are  limited  as  to  the  amount 
which  they  are  permitted  to  receive.  It  is  designed  in 
this  way,  to  make  it  for  the  interest  of  this  class  of  public 


CONSUMPTION    OF    WEALTH.  296 

officers,  to  exert  their  influence  for  the  prevention  of 
crime  and  of  criminal  prosecutions.  Perhaps  also  the 
purity  and  permanency  of  our  civil  institutions,  would  be 
made  more  safe,  if  a  limit  were  thus  fixed  to  the  compen- 
sation of  public  officers  of  every  grade  and  description, 
since  in  this  way  the  struggles  for  office,  so  dangerous  to 
the  State,  would  be  less  frequent  and  violent. 

It  was  remarked,  that  a  remuneration  for  the  services 
of  unproductive  laborers,  is  sometimes  made  under  the 
general  name  of  compensation,  or  pay.  I  here  have  par- 
ticular reference  to  legislators,  and  to  other  instances, 
where  service  is  rendered  on  some  special  occasions,  and 
for  short  periods,  as  in  the  case  of  commissioners  and  re- 
ferees. Military  services  are  also  remunerated  in  this 
manner.  But  as  the  principles  which  apply  in  these  in- 
stances, do  not  essentially  differ  from  those  already  sta- 
ted, it  is  not  necessary  to  enlarge  upon  this  topic. 


^  CHAPTER  VII.  V 

Consumption  of  Wealth. 

Production  was  defined  in  the  first  chapter  of  this 
work,  to  be  the  process  of  adapting  material  products  to 
the  wants  of  men.  Objects  thus  adapted  acquire  proper- 
ties, which  make  them  articles  of  exchangeable  value, 
thus  constituting  the  wealth  of  individuals  and  of  the  na- 
tion.    Now  Consumption,  in  the  most  general  use  of  the 


296  POLITICAL  ECONOMY. 

term,  is  the  opposite  of  Production  ; — it  is  the  destruc- 
tion of  objects  of  value,  or  of  the  properties  on  which 
their  value  depends.  Sometimes  objects  of  value  perish, 
or  decay.  They  are  then  figuratively  said  to  be  consum- 
ed by  time.  In  other  instances,  such  objects  of  value 
are  destroyed  by  violence,  either  accidental  or  designed  : 
and  then  they  are  said  to  be  lost,  or  v/antonly  consumed. 
In  other  cases,  again,  such  objects  are  used  for  the  sup- 
ply of  the  wants  of  the  community,  and  thus  consump- 
tion becomes  the  consummation  of  the  original  purpose  of 
the  producer, — the  commodity  adapted  to  meet  the 
wants  of  men,  is  made  to  meet  these  wants.  There  is 
yet  another  way,  in  which  material  objects  of  value  are 
^said  to  be  consumed-, — it  is  when  their  destruction  is  a 
part  of  the  process  of  production.  Thus  indigo,  and  oth- 
er articles  used  in  the  dyeing  of  clothes,  lose  the  form 
which  they  have  in  commerce,  and  become  united  with 
other  materials  which  constitute  the  texture  of  the  cloth. 
Of  these  different  kinds  of  consumption,  the  last  is  gene- 
rally styled  productive  consumption,  from  the  circum- 
stance just  mentioned, — that  their  consumption  is  a  part 
of  a  process  of  production.  It  will  be  noticed,  that  in 
these  instances  there  is  no  consumption  of  value, — the 
same  value  existing  under  a  new  form.  Perhaps,  then, 
productive  consumption  might  with  some  propriety  be 
considered,  as  merely  that  transformation  of  capital, 
which  has  before  been  shewn  to  be  a  part  of  the  process 
of  production.  In  the  other  cases  mentioned,  the  con- 
sumption is  called  unproductive. 

But  while  the  tenn  consumption,  in  its  most  general 
sense,  is  thus  applied  to  the  destruction  of  material  ob- 
jects, or  of  the  properties  of  these  objects  on  which  their 


CONSUMPTION  OF  WEALTH.  297 

value  depends,  it  also  denotes  the  appropriation,  both  of 
individual  and  of  national  revenues,  to  their  different  uses. 
In  this  signification  of  the  term,  and  such  is  the  use  of  it 
which  is  now  to  be  considered,  it  applies  simply  to  the 
value  of  objects,  without  any  reference  to  the  objects 
themselves. 

To  illustrate  this  distinction,  and  shew  more  fully  the 
meaning  of  the  word  consumption,  as  it  is  applied  to  the 
appropriation  of  revenue,  I  offer  the  following  example  : 
A  farmer  raises  a  hundred  bushels  of  grain,  which  is  a 
part  of  his  annual  revenue.  Now  we  might  apply  the 
word  consumption  to  denote  the  use  made  of  this  grain, 
as  in  the  form  of  bread  it  affords  sustenance  to  the  differ- 
ent members  of  the  community,  thus  supplying  an  urgent 
want.  Here  consumption  is  opposed  to  production,  and 
relates  simply  to  the  destruction,  or  final  disposition  made 
of  products.  But  we  will  now  suppose  the  hundred 
bushels  of  grain  to  be  sold,  and  that  the  value  of  it  in  the 
form  of  money,  is  in  the  hands  of  the  farmer.  Here, 
again,  as  we  look  at  the  uses  made  of  this  money,  we  ap- 
ply the  word  consumption,  not  in  the  sense  of  the  de- 
struction of  material  objects,  or  of  their  properties,  but  as 
it  indicates  the  appropriation  of  individual  revenue  to  its 
different  uses.  Thus  a  part  of  this  revenue  would  prob- 
ably be  expended  in  the  purchase  of  groceries,  or  of  some 
article  of  clothing,  or  of  furniture  ;  another  portion  may 
be  given  to  the  lawyer,  or  to  the  physician,  or  to  the  in- 
structor, in  return  for  their  services  ;  another  may  be  ap- 
propriated to  the  payment  of  taxes  for  the  support  of 
civil  government,  and  for  other  objects  of  general  inter- 
est. Some  portion  also  may  be  spent  in  amusements,  or 
may  be  given  away  in  charity,  according  to  the  habits 


298 


POLITICAL  ECONOMY. 


and  character  of  the  individual.  There  may  yet  remain 
another  portion,  to  take  the  form  of  productive  capital, 
and  thus  be  accumulated  for  the  increase  both  of  individ- 
ual and  of  national  wealth.  In  these  several  ways,  the 
proceeds,  that  is  the  value  of  the  hundred  bushels  of 
wheat,  are  expended,  and  thus  this  portion  of  the  farm- 
er's revenue  is  consumed. 

Now  it  is  in  the  last  mentioned  application  of  the  term, 
as  it  denotes  the  appropriation  of  revenue  to  different 
uses,  that  the  subject  of  consumption  here  presents  itself 
to  our  notice  ;  and  I  propose  in  the  following  sections,  to 
consider  some  of  the  different  ways  in  which  revenue 
may  be  employed. 

1.  Of  that  portion  oj  individual  revenue  ivhich  is  ap- 
propriated to  the  supply  of  animal  wants. 

The  first  and  leading  object  of  most  who  are  either  en- 
gaged in  the  business  of  production,  or  who  render  what 
have  been  called  unproductive  services  to  the  communi- 
ty;  is  to  obtain  a  supply  of  their  animal  wants;  and  to 
this  object  a  large  portion  of  their  revenue  is  usually  de- 
voted. Indeed,  by  many,  the  whole  amount  of  their  in- 
come is  thus  necessarily  employed,  excepting  perhaps 
some  small  share,  reserved  for  the  payment  of  taxes  and 
other  unavoidable  expenses.  Of  these  wants,  the  first  class 
embraces  food,  shelter,  clothing,  fuel, — those  articles 
which  are  essential  to  existence.  Then  come  the  com- 
forts and  conveniences  of  civilized  life — the  artificial  wants 
of  men,  which  by  indulgence  soon  become  real  wants. 

When  a  portion  of  individual  revenue  is  thus  apportion- 
ed to  the  wants  of  its  possessor,  it  is  not  necessarily  im- 
phed,  that  the  objects  themselves  thus  appropriated,  or 
the  value  of  them,  immediately  cease  to  exist.     It  is  of- 


CONSUMPTION  OF  WEALTH.  299 

ten  otherwise.  An  article  of  furniture  may  contribute  to 
the  comfort  or  convenience  of  its  possessor,  and  thus  sup- 
ply an  animal  want,  and  still  may  continue  to  exist  for 
many  years.  The  consumption  of  the  object  itself  thus 
appropriated  may  be  gradual,  still,  as  a  final  disposition  is 
made  of  the  portion  of  revenue  thus  expended,  this  por- 
tion of  revenue  is  said  to  be  consumed. 

In  reference  to  that  portion  of  individual  revenue, 
which  is  thus  apportioned  to  the  supply  of  animal  wants, 
Political  Economy  enjoins  moderation  in  the  use  of  the 
comforts  and  enjoyments  of  life.  It  says  to  the  man  of 
limited  income,  that  his  expenditures  of  this  class  should 
be  proportioned  to  his  revenue,  so  that  a  share  may  re- 
main for  the  supply  of  other  wants,  and,  if  practicable, 
some  portion  be  kept  in  reserve  to  take  the  form  of  pro- 
ductive capital,  and  thus  become  provision  for  the  future. 
And  to  enforce  this  counsel,  it  points  to  the  improved 
condition  of  him,  who  devotes  a  portion  of  his  income 
to  the  supply  of  his  mental  and  moral  wants ;  it  also  ex- 
hibits on  the  one  hand  the  certain  ruin  of  that  man,  who  lives 
beyond  his  income,  and  the  advancing  prosperity  of  him, 
who  in  the  practice  of  frugality,  makes  continual  additions 
to  his  productive  capital.  To  men  of  affluence,  it  allows 
a  freer  use  of  the  comforts  of  life,  but  at  the  same  time 
it  enjoins,  that  they  be  not  wasteful.  They  are  told,  that 
as  the  laws  and  institutions  of  society  make  them  secure 
in  their  possessions,  they  are  to  make  returns  for  benefits 
thus  received,  by  the  employment  of  their  revenues,  and 
the  exerting  of  their  influence  in  those  ways,  which  may 
conduce  to  the  public  good ;  and  in  this  connexion,  they 
are  reminded  of  the  influence  of  their  example  on  the  less 
favored  classes  of  society. 


300  POLITICAL  ECONOMY. 

In  some  nations  sumptuary  laws  have  been  enacted, 
but  the  expediency  and  wisdom  of  such  measures  are 
more  than  doubtful.  From  the  nature  of  the  case  it  is 
difficult,  if  not  impracticable,  to  fix  on  any  limits  to  ad- 
vantageous consumption  of  the  kind  we  are  considering, 
to  decide  where  necessaries  end  and  where  luxuries  be- 
gin. It  is  evident,  that  the  expenditures  of  each  mem- 
ber of  the  community,  should  bear  a  proportion  to  his  in- 
come and  to  his  condition  in  society,  and  what  in  one  in- 
dividual may  be  proper  and  advantageous  consumption, 
in  another  might  be  improper  and  disadvantageous. 
Hence  the  difficulty  of  framing  laws,  which  shall  be  ap- 
plicable to  individuals  thus  differing  in  their  situation  and 
circumstances.  But  there  is  another  important  objection 
to  all  restrictions  of  this  nature.  It  deprives  society 
of  its  most  active  stimulus  to  exertion.  Men  need  ever 
to  have  before  them  the  prospect  of  advancement, — of 
greater  abundance  and  of  higher  enjoyments.  It  is  thus, 
that  they  are  led  to  become  industrious,  and  to  shake  off 
that  indolence  and  lethargy,  to  which  they  are  so  strongly 
inclined.  Even  a  taste  for  luxuries  may  become  in  this 
way  highly  beneficial  to  the  community. 

But  on  the  other  hand,  the  impression,  which  has  some- 
times prevailed,  that  the  wasteful  extravagance  of  the  rich 
is  to  be  encouraged,  on  the  ground,  that  in  this  way  more 
full  employment  is  furnished  to  the  laboring  classes  of  so- 
ciety, is  to  be  guarded  against,  as  unfounded  and  hurtful. 
On  this  point,  neither  encouragement  nor  restraint  is  need- 
ed. Set  men  free,  on  the  one  hand  from  the  restrictions 
of  legal  statutes,  and  on  the  other,  from  the  influence  of 
erroneous  opinions,  and  those  results,  will  be  secured, 
which  are  most  beneficial  to  the  individual  and  to  the 
community. 


CONSUMPTION  OP  WEALTH.  301 

2.  Of  that  portion  of  individual  revenue,  which  is 
appropriated  to  the  payment  of  public  taxes. 

Taxes  are  requisitions  made  by  the  government  of  a 
country,  or  by  local  authorities,  for  the  support  of  civil  and 
municipal  institutions,  and  for  other  objects  of  general  in- 
terest. Every  member  of  a  community,  who  participates 
in  the  benefits  arising  from  the  association,  is  bound  by 
this  consideration  and  by  other  principles  pertaining  to  the 
social  compact,  to  contribute  his  share  towards  the  sup- 
port of  the  common  burdens  ;  and  it  is  in  the  form  of  a 
tax,  that  this  contribution  is  usually  made. 

Civil  government  is  regarded  by  the  political  economist 
as  strictly  an  economical  arrangement;  it  is  a  mode  of  se- 
curing to  each  individual  objects  of  the  highest  importance 
to  his  welfare.  Security  of  person  and  of  property  are 
prominent  among  these  benefits,  and  were  individual  mem- 
bers of  a  community  to  attempt  the  attainment  of  these 
objects,  each  one  for  himself,  this  course,  if  practicable, 
would  evidently  be  far  more  expensive.  The  same  re- 
mark applies  to  other  objects,  for  the  attainment  of  whicii 
the  revenues  of  a  nation  are  consumed — to  what  is  ex- 
pended in  public  works,  in  education,  and  in  support  of 
the  poor.  All  these  object  are  thus  effected  in  the  most 
economical  manner. 

Hence,  then,  it  should  be  felt,  that  though  taxation  is 
a  burden,  it  is  a  necessary  burden,  and  that  for  what  is 
thus  expended,  a  full  equivalent  is  received.  At  least 
this  will  be  the  case,  where  taxes  are  judiciously  and  im- 
partially laid  and  collected,  and  the  revenue  thus  derived 
is  wisely  expended.  The  expenditure  of  public  revenue 
will  form  the  subject  of  the  next  chapter,      I  propose 


26 


302  POLITICAL    ECONOMY. 

in  this  place,  to  bring  to  view  some  of  those  principles, 
which  relate  to  the  assessment  and  collection  of  taxes. 

Adam  Smith,  when  treating  on  the  subject  of  taxation, 
in  his  Wealth  of  Nations,  has  stated  four  general  princi- 
ples, by  the  application  of  which,  the  fairness  and  ex- 
pediency of  all  measures  of  this  nature  may  be  tested. 
I  shall  here  introduce  what  he  has  said  on  this  subject, 
with  some  abridgement,  and  then  apply  the  principles 
stated,  to  the  system  of  taxation  in  our  own  country. 

"  I.  The  subjects  of  every  state  ought  to  contribute  to- 
wards the  support  of  the  government,  as  nearly  as  possi- 
ble, in  proportion  to  their  respective  abilities  ;  that  is,  in 
proportion  to  the  revenue  which  they  respectively  enjoy 
under  the  protection  of  the  state.  The  expense  of  go- 
vernment to  the  individuals  of  a  great  nation,  is  hke  the 
expense  of  management  to  the  joint  tenants  of  a  great  es- 
tate, who  are  all  obliged  to  contribute  in  proportion  to 
their  respective  interests  in  the  estate.  In  the  observa- 
tion or  neglect  of  this  maxim  consists,  what  is  called  the 
equality  or  inequality  of  taxation. 

"  II.  The  tax  which  each  individual  is  bound  to  pay  ought 
to  be  certain,  and  not  arbitrary.  The  time  of  payment, 
the  manner  of  payment,  the  quantity  to  be  paid,  ought  all 
to  be  clear  and  plain  to  the  contributor,  and  to  every  other 
person.  The  certainty  of  what  each  individual  ought  to 
pay  is,  in  taxation,  a  matter  of  so  great  importance,  that 
a  very  considerable  degree  of  inequality,  it  appears,  I  be- 
lieve, from  the  experience  of  all  nations,  is  not  near  so 
great  an  evil  as  a  very  small  degree  of  uncertainty. 

'^  III.  Every  tax  ought  to  be  levied  at  the  time,  or  in 
the  manner,  in  which  it  is  most  likely  to  be  convenient 
for  the  contributor  to  pay  it.     A   tax  upon  the  rent  of 


CONSUMPTION  OF  WEALTH.  303 

land  or  of  houses,  payable  at  the  same  tertii  at  which  such 
rents  are  usually  paid,  is  levied  at  the  time  when  it  is  most 
likely  to  be  convenient  for  the  contributor  to  pay  ;  or,  when 
he  is  most  likely  to  have  wherewithal  to  pay.  Taxes  upon 
such  consumable  goods  as  are  articles  of  luxury,  are  all 
finally  paid  by  the  consumer,  and  generally,  in  a  manner 
that  is  very  convenient  for  him.  He  pays  them  by  little 
and  little,  as  he  has  occasion  to  buy  the  goods.  As  he  is 
at  liberty  too,  either  to  buy,  or  not  to  buy,  as  he  pleases, 
it  must  be  his  own  fault  if  he  suffers  any  considerable  in- 
conveniency  from  such  taxes. 

*'  I V.  Every  tax  ought  to  be  so  contrived  as  both  to  take 
out  and  to  keep  out  of  the  pockets  of  the  people  as  little 
as  possible,  over  and  above  what  it  brings  into  the  public 
treasury  of  the  state.  A  tax  may  either  take  out  or  keep 
out  of  the  pockets  of  the  people  a  great  deal  more  than  it 
brings  into  the  public  treasury,  in  the  four  following  ways. 
First,  the  levying  of  it  may  require  a  great  number  of  of- 
ficers, whose  salaries  may  eat  up  the  greater  part  of  the 
produce  of  the  tax,  and  whose  perquisites  may  impose 
another  additional  tax  upon  the  people.  Secondly,  it  may 
obstruct  the  industry  of  the  people,  and  discourage  them 
from  applying  to  certain  branches  of  business,  which  might 
give  maintenance  and  employment  to  great  multitudes. 
While  it  obliges  the  people  to  pay,  it  may  thus  diminish, 
or  perhaps  destroy,  some  of  the  funds  which  might  enable 
them  more  easily  to  do  so.  Thirdly,  by  the  forfeitures 
and  other  penalties  which  those  unfortunate  individuals  in- 
cur who  attempt  unsucces^^fully  to  evade  the  tax,  it  may 
frequently  ruin  them,  and  thereby  put  an  end  to  the  bene- 
fit which  the  community  might  have  received  from  the 
employment  of  their  capitals.     An  injudicious  tax  offers  a 


^04  POLITICAL    ECONOMY. 

great  temptation  to  smuggling.  But  the  penalties  of  smug- 
gling must  rise  in  proportion  to  the  temptation.,  The  law, 
contrary  to  all  the  ordinary  principles  of  justice,  first  cre- 
ates the  temptation,  and  then  punishes  those  who  yield 
to  it ;  and  it  commonly  enhances  the  punishment  too  in 
proportion  to  the  very  circumstance  which  ought  certainly 
to  alleviate  it,  the  temptation  to  commit  the  crime.  Fourth- 
ly, by  subjecting  the  people  to  the  frequent  visits  and  the 
odious  examination  of  the  tax-gatherers,  it  may  expose 
them  to  much  unnecessary  trouble,  vexation,  and  oppres- 
sion ;  and  though  vexation  is  not,  strictly  speaking,  ex- 
pense, it  is  certainly  equivalent  to  the  expense  at  which 
every  man  would  be  willing  ro  redeem  himself  from  it. 
It  is  in  some  one  or  other  of  these  four  different  ways  that 
taxes  are  frequently  so  much  more  burdensome  to  the 
people  than  they  are  beneficial  to  the  sovereign." 

Of  the  dijSerent  taxes  in  the  United  States,  the  first 
and  most  prominent  distinction  is  into  direct  and  indirect. 
Direct  taxes,  of  which  there  are  several  forms,  are  as- 
sessments upon  individuals,  based  generally  on  their  sup- 
posed ability  to  pay.  Indirect  taxes  are  duties  on  arti- 
cles of  consumption,  which  enhance  their  price,  and  thus 
fall  upon  consumers. 

Different  kinds  of  Direct  Taxes. 

Capitation  Tax.  A  capitation,  or,  as  it  is  more  fre- 
quently called  in  this  country,  a  poll  tax,  is  an  assessment 
on  individuals  without  reference  to  their  property.  In 
England,  and  France,  and  other  countries  where  distinc- 
tions of  rank  are  known,  a  poll  tax  is  assessed  on  the 
ground  of  these  distinctions,  those  in  each  class  of  society 


DIRECT  TAXES.  305 

paying  the  same  amount.  Thus,  dukes,  earls,  marquis- 
es, and  others,  pay  a  poll  tax,  each  in  proportion  to  his 
grade.  In  our  own  country,  where  distinctions  of  rank 
are  unknown,  a  poll  tax  is  the  same  in  amount  on  all 
male  members  of  the  community,  who  are  not  on  ac- 
count of  age,  or  by  some  disability,  excused  by  law.* 

Tax  on  real  and 'personal  estate.  Though  in  making  out 
tax  lists  it  is  usual  to  mark  the  distinction  between  real 
and  personal  property,  and  also  to  enumerate  different  clas- 
\ses  of  objects,  as  lands,  houses,  bank-stock,  navigation  Sic, 
these  distinctions  are  made,  merely  with  reference  to  the 
convenience  of  the  valuation  of  property  and  the  assess- 
ment of  taxes,  without  any  regard  to  a  difference  in  the 
rate  of  taxation,  grounded  on  the  kind  of  property.  For 
it  is  usual,  after  ascertaining  in  this  way  the  total  amount 
of  property  in  the  town,  county,  or  State,  as  the  case 
may  be,  to  apportion  the  whole  amount  to  be  raised  on 
the  value  of  the  property  in  the  possession  of  each  indi- 
vidual. 

Tax  on  income.  Another  form  of  taxation,  which  is 
recognised  in  our  statute  books,  though  not  extensively 
adopted  in  practice,  is  a  tax  on  income.  The  law  in 
reference  to  this  tax  usually  provides,  that  the  different 
professions  and  employments  in  life  shall  be  subject  to  a 
tax,  proportional  to  the  income  derived  from  them.  In 
the  application  of  this  law,  however,  taxes  on  income  are 

*  In  assessing  a  poll  tax,  it  is  customary  to  proportion  ^  or  ^ 
of  the  whole  amount  to  be  raised  on  those  subject  by  law  to 
the  payment  of  this  tax,  and  if  the  sum  assessed  on  individuals 
exceeds  an  amount  prescribed  by  statute,  and  which  is  usually 
a  small  sum— one,  or  two  dollars,  the  proportion  of  the  whole 
tax  to  be  raised  in  this  form  is  diminished. 
26* 


306  POLITICAL    ECONOMY. 

usually  limited  to  professional   men,  especially  to  those 
whose  compensation  is  paid  in  the  form  of  salary. 

Taxes  on  income  are  usually  regarded  with  dislike, 
and  the  apportioning  of  them  is  attended  with  difficulty. 
It  is  difficult,  except  in  the  case  of  those  who  receive  a 
fixed  and  known  compensation,  to  ascertain  the  amount 
of  income,  and  if  this  tax  be  limited  to  one  class  of  the 
community,  while  others  escape  whose  situation  and  em- 
ployment are  similar,  there  are  grounds  of  complaint. 
Besides,  it  is  to  some  extent  a  tax  upon  industry,  and 
thus  manifestly  injurious  to  the  interests  of  the  public. 
It  would  also  be  necessary,  in  order  to  its  equal  appor- 
tionment, to  take  into  the  account  the  style  of  living,  and 
the  necessary  expenditures  of  the  different  classes  of  so- 
ciety. 

Indirect  Taxes. 

Indirect  taxes  bear  different  names,  as  duties,  customs, 
excises,  imposts,  but  under  these  different  names,  the 
same  thing  in  its  nature  is  denoted — -a  tax  levied  on  com- 
modities and  paid  by  consumers. 

The  adjustment  of  indirect  taxes,  or  the  forming  of  a 
tariff  list,  prescribing  the  amount  to  be  paid  on  different 
commodities,  is  often  attended  with  difficulty,  especially, 
as  in  this  manner  the  interests  of  different  classes  of  the 
community,  and  of  different  sections  of  a  country,  are  li^ 
able  to  be  variously  affected.  On  this  ground,  objections 
are  sometimes  made  to  indirect  taxation  ;  but  the  difficul- 
ties which  arise  from  this  source,  when  duties  are  levied 
with  no  other  object  than  a  collection  of  a  revenue,  are 
less,  than  those  often  attendant  on  the  assessment  and  col- 
lection of  direct  taxes. 


INDIRECT  TAXES.  307 

Objections  are  also  made  to  indirect  taxes  as  expen- 
sive in  their  collection  ;  but  where  due  economy  is  intro- 
duced into  this  department  of  the  public  service,  this 
ground  of  objection  is  also  removed. 

On  the  other  hand,  there  are  important  advantages, 
which  attend  this  form  of  taxation.  What  is  thus  paid  is 
usually  paid  with  little  inconvenience  and  uneasiness. 
Indeed  many  are  not  aware,  that  they  are  paying  a  tax, 
when  for  their  own  use  they  purchase  some  article  on 
which  a  duty  has  been  laid,  augmenting  its  price ;  or,  if 
aware  of  it,  the  inducement  to  obtain  the  article  is  so 
strong,  that  the  additional  price,  arising  from  the  tax,  is 
not  felt  to  be  an  objection.  Taxes  are  also  thus  paid  in 
small  sums,  and  according  to  the  ability  of  the  payer  at 
the  time. 

Another  circumstance  before  alluded  to,  which  re- 
commends indirect  taxation,  is,  that  it  enables  the  govern- 
ment to  exert  an  influence  on  consumption,  favorable  to 
the  economical  and  the  moral  interest  of  the  community. 

I  have  thus  mentioned  the  different  taxes,  that  are  im- 
posed by  the  public  authorities  in  this  country,  and  which 
taken  together,  constitute  the  system  of  taxation  here 
found.  If  now  we  apply  to  this  system  the  principles,  of 
A.  Smith,  it  will  be  seen,  that  it  is  probably  the  best,  that 
under  existing  circumstances  can  be  adopted. 

1.  It  secures,  so  far  as  is  practicable,  an  equal  and  im- 
partial distribution  of  the  public  burdens.  Should  each 
different  kind  of  taxation  that  has  been  mentioned,  be  sep- 
arately considered,  objections  would  be  seen  to  exist. 
The  poll  tax,  which  assesses  an  equal  amount  on  all  wheth- 
er rich  or  poor,  if  it  were  the  only  tax  imposed,  would 
obviously  be  unfair.  A  tax  levied  on  the  amount  of  proper- 


308  POLITICAL    ECONOMY. 

ty,  both  real  and  personal,  in  the  possession  of  individuals, 
would  not  always  correspond  with  their  ability  to  pay,  or 
their  obligations  to  support  public  burdens,  as  determined 
by  other  considerations.  A  tax  on  income  also,  is  un- 
equal, since  it  looks  only  at  the  amount  received,  with- 
out reference  to  the  necessary  expenditures  of  the  indi- 
vidual, in  the  situation  in  which  he  is  placed,  and  which 
are  evidently,  much  larger  in  some  instances  than  in 
others.  So  too,  in  respect  to  indirect  taxation,  if  it  were 
the  only  form  adopted,  it  would  throw  upon  some  a  large 
proportion  of  the  expenses  of  the  community,  while  others 
would  be  left  untaxed  ;  for  while  one  part  of  the  commu- 
nity are  consumers  to  a  large  amount  of  foreign  commodi- 
ties, on  which  indirect  taxes  are  collected,  another  part  al- 
most entirely  dispense  with  their  use.  But  now  when 
the  whole  system  of  taxation  is  applied  in  its  different 
parts,  these  inequalities  are  all  remedied.  He  who  bears 
too  large  a  share  of  the  burden  in  one  form,  has  less  to 
bear  in  another,  and  he  who  escapes  one  kind  of  taxation, 
is  brought  in  to  pay  his  due  proportion  in  another  kind, 
and  thus  an  equal  distiibution  is  effected.  Such  at  least 
is  the  tendency  of  our  present  system  of  taxation  ;  but  it  is 
obvious,  that  no  general  principles  and  regulations  can  be 
adopted  on  this  subject,  which  in  their  application  will  not 
require  exceptions  to  be  made.  Much  also  must  evident- 
ly depend  on  the  fairness  and  impartiality  of  those,  by 
whom  the  business  of  assessing  and  collecting  taxes  is 
conducted. 

If  now  we  look  at  the  second  point  mentioned  by  A. 
Smith — the  definiteness  of  taxation  as  to  time  and  man- 
ner of  payment  and  the  amount  to  be  paid,  this  also  is 
well  secured  by  our  present  system.     The  principles  and 


INDIRECT  TAXES.  309 

rules  observed  in  the  assessment  of  direct  taxes  are  gen- 
erally known  and  understood,  and  the  time  and  manner 
of  payments  described.  Every  tax-payer  is  not  only  dis- 
tinctly informed  of  the  amount  of  his  taxes,  but,  except- 
ing the  tax  on  income,  which  is  left  to  the  arbitrary  de- 
cision of  those  by  whom  it  is  imposed,  is  permitted  to 
know  by  what  calculations  this  amount  is  determined. 
It  is  the  case  too,  that  those  by  whom  direct  taxes  are 
assessed,  are  usually  selected  from  among  the  people,  and 
by  their  own  choice,  which  offers  a  security  that  this  as- 
sessment will  be  fairly  and  impartially  made.  Ways  of 
obtaining  redress  are  also  open  to  those  who  consider 
themselves  aggrieved.  In  regard  to  indirect  taxes,  the 
duties  on  each  article  thus  subjected  to  taxation,  are  fix- 
ed by  law,  and  made  known  ;  and  every  one  is  left  to 
become  a  consumer  of  commodities  thus  taxed,  to  any 
extent  which  he  pleases. 

The  third  point  to  be  considered,  relates  to  the  time 
and  circumstances  of  payment.  And  here,  as  has  been 
before  mentioned,  is  one  of  the  principal  advantages  at- 
tendant on  indirect  taxation,  since  what  is  thus  collected 
is  paid  in  small  sums,  and  its  payment  is  not  felt  to  be  an 
inconvenience  ;  perhaps  it  is  unknown,  or  not  regarded 
by  the  payer.  It  is  also  usually  so  arranged  in  respect  to  di- 
rect taxes,  that  the  amount  assessed  is  known  some 
weeks  or  months  before  the  tax  is  collected,  and  thus  the 
payer  is  left  to  suit  his  own  convenience  in  the  time  and 
circumstances  of  payment. 

The  remaining  particular  relates  to  the  expense  and 
other  circumstances,  attending  the  collection  of  taxes,  and 
also  to  the  influence  of  different  taxes  on  the  industry 
and  general  interests  of  the  community. 


310  POLITICAL    ECONOMY. 

Perhaps  no  plan  could  be  devised,  to  essentially  di- 
minish the  expenses  incurred  in  the  collection  of  taxes  in 
this  country.  As  our  Government  is  constituted,  there 
are  manifest  advantages  in  the  arrangement,  by  which 
the  National  and  State  authorities  derive  their  revenues 
in  different  ways,  and  hence  the  expediency  of  support- 
ing establishments  for  both  direct  and  indirect  taxation. 
And  both  are  so  conducted,  that  there  is  ground  of  com- 
plaint, neither  as  to  the  expenses  of  collection,  nor  any 
unnecessary  trouble  and  vexation.  At  the  present  time, 
also,  the  burden  of  taxation  in  this  country  is  too  light  to 
offer  tenaptations  to  the  evasion  of  'taxes,  or  in  any  way 
to  affect  unfavorably  the  interests  of  the  community. 
Every  individual,  therefore,  is  bound  to  pay  his  propor- 
tion of  the  public  expenses  cheerfully  and  promptly, 
knowing  and  feeling,  that  he  receives  in  return  an  ample 
remuneration,  in  the  civil  rights  and  immunities,  which 
he  enjoys,  and  in  the  peace  and  security  in  which  he 
lives. 

Of  that  portion  of  individual  revenue  which  is  appropriated 
to  the  payment  of  unproductive  laborers,  to  amusements  and 
to  charities. 

That  a  part  of  the  revenue  of  the  sick  man  may  wisely 
be  appropriated  to  the  payment  of  the  physician,  by 
whose  advice  and  assistance  health  is  restored,  no  one  can 
doubt.  So  too,  he,  whose  rights  of  property  or  person 
are  eridangered,  or  who  needs  aid  in  the  transfer  of  property, 
or  any  legal  act  of  a  similar  nature,  applies  to  the  lawyer 
for  assistance,  and  can  afford  to  remunerate  him  for  the 
services  thus  rendered.  And  in  most  instances,  there  is 
no  danger,  that  an  undue  proportion  of  individual  revenue 


USE  OF  SURPLUS  REVENUE.  311 

will  be  devoted  to  these  objects.  Now  and  then,  a  splen- 
etic or  a  litigious  man  is  found,  who  thus  impoverishes 
himself,  but  such  evils  usually  work  their  own  cure. 

Other  services,  for  the  remuneration  of  which  individu- 
al revenue  is  expended,  relate  to  education,  and  to  moral 
and  religious  instruction.  On  the  importance  of  these 
objects,  as  they  are  connected  both  with  the  happiness  of 
individuals  and  the  welfare  of  communities,  incidental  re- 
marks have  already  been  made.  It  has  also  been  shewn, 
that  such  services  have  an  indirect  bearing  on  the  eco- 
nomical interests  of  society.  The  general  remark  may 
here  be  added,  with  particular  reference  to  education, 
that  so  far  as  the  portion  of  revenue  thus  consumed,  is 
given  for  aid  in  preparing  for  the  more  able  and  skilful 
discharge  of  the  business  of  life,  it  becomes  productive 
capital  well  invested  ; — so  far  as  it  furnishes  gratification 
to  the  natural  thirst  of  man  for  knowledge,  or  leads  to 
the  enlargement  and  improvement  of  the  mental  powers, 
it  is  highly  conducive  to  individual  enjoyment. 

Amusements.  By  some  individuals  a  portion  of  their 
revenue  is  expended  in  amusements ;  and  the  public 
good  requires,  on  principles  before  stated,  that  the  pros- 
pect of  gratifications  of  this  kind  should  be  before  men, 
as  a  motive  to  exertion.  It  also  requires,  that  those 
amusements  should  be  chosen,  which  are  strictly  consist- 
ent with  purity  of  morals.  And  in  this  injunction,  it 
looks  at  the  tendency  of  the  gratification.  If  from  ac- 
companying circumstances  and  associations,  the.  indul- 
gence, though  in  itself  innocent,  leads  to  evil,  it  is  to  be 
shunned.  It  is  on  this  ground,  that  theatrical  entertain- 
ments, and  other  amusements  of  a  similar  nature,  are 
condemned. 


312  POLITICAL    ECONOMY. 

There  is  also  a  class  of  amusements,  which  from  their 
effects  on  both  the  economical  and  moral  interests  of  in- 
dividuals and  of  society,  are  deserving  of  particular  repre- 
hension. I  refer  to  gambling  in  all  its  forms — at  the 
bowling-green,  the  card  table,  or  the  lottery  office. 
Whether  we  look  at  the  passions  indulged  in  these  em- 
ployments, or  at  the  waste  of  time  and  property  incurred, 
or  at  the  ruin  and  misery,  which  so  generally  follow  in 
their  train,  we  see  abundant  reason,  why  they  should  be 
regarded  as  opposed  to  the  best  interests  of  society.  It 
will  also  be  noticed,  that  the  transfers  of  property  thus  ef" 
fected,  are  by  no  means  advantageous,  but,  on  the  con- 
trary, often  place  it  at  the  disposal  of  those,  who  waste 
and  squander  it. 

The  most  rational  amusements  are  evidently  those, 
w^hich  unite  usefulness  with  pleasure, — either  promoting 
the  happiness  of  others,  and  thus  gratifying  the  benevo- 
lent feelings,  or  adding  to  the  stores  of  practical  and  val- 
uable knowledge. 

Charities,  "  Ye  have  the  poor  always  with  you," 
said  our  divine  teacher,  and  whether  we  regard  the  sym- 
pathies of  our  nature,  the  constitution  of  civil  society,  or 
the  general  principles  of  moral  obligation,  we  find  abun- 
dant reason  for  the  exercise  of  the  charitable  feelings. 
Every  one,  according  to  his  ability,  is  bound  to  minister 
to  the  wants  of  the  necessitous  around  him,  and  hence 
every  one  is  bound  to  appropriate  to  this  object  some 
portion  of  his  revenue. 

The  most  interesting  question,  which  presents  itself  on 
this  subject  to  the  Political  Economist,  relates  to  the 
manner  in  which  relief  is  afforded,  whether  it  shall  be  ex- 
tended by  the  hand  of  individuals,  or  by  public  institu- 


NATIONAL  EXPENDITURE.  313 

tions  and  agents.     But  this  topic  will  present  itself  in  the 
following  chapter. 


CHAPTER  VIIL 


National  expenditure. 


Nations  in  their  capacity  as  public  bodies,  receive  a  rev- 
enue and  possess  and  consume  wealth.  It  will  be  notic- 
ed, however,  that  what  is  thus  received  and  held  and 
used  by  the  public  authorities  of  a  country,  in  behalf  of  the 
nation,  is  to  be  distinguished  from  national  wealth,  as  that 
term  has  been  defined.  Hence  the  term  public  property 
is  sometimes  applied  to  the  former,  and  the  wealth  thus 
held  is  said  to  belong  to  the  government. 

Public  property  may  consist  of  all  the  different  articles 
which  constitute  wealth.  National  revenues  also,  though 
generally  received  in  money,  may  be  paid  in  any  form, 
suited  to  the  convenience  of  those  from  whom  they  are 
received  and  of  the  government. 

National  revenues  are  derived  from  different  sources, 
principally  from  taxation.  An  income  is  sometimes  deriv- 
ed from  the  sale  of  public  lands,  and  in  some  instances 
governments  engage  in  processes  of  production.  The 
second  of  these  sources,  it  is  evident,  must  soon  be  exhaus- 
ted, especially  as  the  policy  of  every  nation  requires,  that 
its  territory  should  be  possessed  and  cultivated  by  individ- 
ual proprietors.  As  to  the  third,  it  is  ever  found,  that  at- 
tempts of  this  kind  are  unwisely  made,  the  expense  of 
their  management  generally  equalling,  if  not  exceeding,  the 
27 


314  POLITICAL  ECONOMY. 

revenue  derived  from  them.  It  is  then,  principally,  to  di- 
rect and  indirect  taxes,  that  nations  look  for  their  public 
revenues.  And  as  this  subject  has  already  received  at- 
tention, our  inquiries  in  the  present  chapter  will  relate  to 
the  different  ways,  in  which  the  revenues  of  a  nation  are 
expended. 

The  consumption  of  a  nation  is  principally  in  the  pay- 
ment of  the  services  of  its  functionaries  in  the  civil,  judi- 
cial and  military  departments.  Some  portion  is  also  ex- 
pended in  public  works,  in  education,  and  in  affording  relief 
to  the  destitute.  These  different  modes  of  expenditure 
will  now  receive  a  distinct  and  brief  consideration. 

Of  that  portion  of  national  revenue,  which  is  expended  in  de- 
fraying the  charges  of  civil  and  judicial  administration. 

The  nature  of  the  services  rendered  by  public  func- 
tionaries, and  also  the  general  principles  which  apply  to 
the  remuneration  of  these  services,  whether  in  the  form 
of  fees  or  salaries,  have  been  considered  in  preceding 
chapters.  One  or  two  topics  only  of  a  general  nature 
here  require  attention. 

Economy  requires,  that  the  remuneration  of  public 
functionaries  in  the  civil  and  judicial  departments  of  pub- 
lic service,  should  be  sufficiently  high,  to  command  the 
best  talents  in  the  community.  Most  of  the  duties  to  be 
performed  are  important,  and  some  of  them  reponsible  and 
difficult,  requiring  great  integrity  and  skill ;  and  the  pub- 
lic can  well  afford  to  offer  the  lure  of  a  high  compensa- 
tion to  those,  who  possess  the  necessary  qualities,  mak- 
ing it  for  their  interest  to  engage  in  the  service  of  the 
State. 

On  the  other  hand  it  should  be  remembered,  that  if  the 


NATIONAL  EXPENDITURE.  315 

compensation  of  public  officers  very  far  exceeds  that  of 
those,  who  are  engaged  in  other  similar  employments  in 
life,  violent  and  dangerous  struggles  for  office  will  arise, 
and  very  probably  the  places  of  trust  and  power  will  be 
filled  by  ambitious  and  corrupt  men,  who  are  altogether 
inadequate  to  the  discharge  of  the  duties  of  their  stations. 
In  some  nations,  there  are  public  functionaries,  who  re- 
ceive no  other  compensation  for  their  services,  than  the 
honor  and  power  attached  to  office.  .  It  is  so  with  mem- 
bers of  parliament  in  England.  The  principal  argument 
adduced  in  support  of  this  plan,  is,  that  in  this  way  secu- 
rity is  obtained  against  venal  influence,  since  those  only 
will  be  employed  in  the  public  service,  who  from  their 
ample  fortunes  are  raised  above  all  mercenary  considera- 
tions. On  the  other  hand,  it  is  objected,  that  integrity 
and  skill  in  conducting  public  affairs  are  not  necessarily 
Connected  with  great  wealth,  and  that  hence,  from  the  in- 
competency of  those  employed,  an  arrangement  which 
may  be  deemed  economical,  may  eventually  prove  most 
expensive  to  the  nation.  Neither  are  men  of  large  for- 
tunes entirely  insensible  to  venal  and  corrupt  influences. 
The  love  of  wealth  and  the  desire  for  its  attainment,  often 
increase  with  its  possession.  It  is  also  said,  that  the  pub- 
lic safety  may  forbid,  that  the  great  influence  which  at- 
taches itself  to  wealth,  should  in  this  way  be  augmented 
by  the  power  of  office. 

Another  remark  connected  with]  expenditures  in  sup- 
port of  public  officers,  merits  attention.  It  relates  to  the 
fondness  for  show  and  parade,  which  exists  in  some 
communities,  and  the  expectation,  that  those  in  office 
will  gratify  these  desires.  But  it  should  be  remembered 
th  at  the  expense  of  every  kind  of  display  made  by  those 


ai6 


POLITICAL  ECONOMY. 


in  office  is  ultimately  borne  by  the  community,  since  in 
this  way  the  necessity  of  a  higher  remuneration  is  creat- 
ed. Every  gratification  then  of  the  expectation  of  parade 
and  show  in  public  officers,  is  at  the  expense  of  those 
who  are  indulged,  and  is  generally  dearly  paid  for. 

Of  that  portion  of  the  'public  revenue  which  is  appropriated 
to  defray  the  charges  of  wars  and  of  Military  and  Naval 
establishments. 

From  the  prevailing  sentiments  and  practices  on  the 
subject  of  war,  it  becomes  necessary,  that  some  provision 
should  be  made  by  nations,  for  their  defence  against  for- 
eign aggressions,  and  for  the  enforcement  of  their  rights, 
and  to  this  object  no  inconsiderable  portion  of  the  reve- 
nues of  a  nation  are  devoted. 

The  expenses  connected  with  war  are  not  limited  to 
seasons  of  actual  warfare,  but  embrace  also  the  support 
of  what  is  called  a  peace  establishment,  which  includes 
military  equipments  and  armaments,  and  also  the  pay  of 
a  professional  soldiery.  There  are  different  arguments, 
by  which  the  necessity  and  expediency  of  this  arrange- 
ment are  defended.  It  is  thought  to  be  more  economical, 
and  in  other  ways  conducive  to  the  public  interest,  thus 
to  support  a  hired  soldiery,  than  that  those  engaged  in 
the  productive  employments  of  life,  should  be  subject  to 
interruption  in  their  labors,  and  be  exposed  to  the  temp- 
tations and  hardships  and  dangers  of  a  military  life.  War 
too  has  become  an  art,  and  success  in  conducting  it  de- 
pends much  on  the  perfection,  to  which  this  art  is  carried 
in  a  country  ;  hence  the  necessity,  that  a  professional  sol- 
diery should  be  trained  and  prepared  for  this  department 
of  public  service.     And  further,  the  old  maxim  is  addu- 


NATIONAL  EXPENDITURE, 


317 


ced,  that  the  best  security  for  peace  is  a  state  of  full 
preparation  for  war.  If  indeed  this  last  argument  were 
well  founded,  it  would  be  wise  to  make  large  expendi- 
tures in  support  of  a  peace  establishment ;  but  it  is  to  be 
feared,  that  a  state  of  preparation  for  war  and  a  desire  for 
active  service  on  the  part  of  those  trained  to  the  art, 
have  too  often  led  nations  to  subject  themselves  to  this 
greatest  of  national  curses. 

But  the  support  of  a  peace  establishment  is  an  incon- 
siderable portion  of  the  charges,* incurred  in  this  depart- 
ment of  national  expenditure.  The  consumption  of 
wealth  in  a  protracted  war,  is  immense.  If  the  contest 
is  supported  abroad,  the  expenses  of  conducting  the  war 
are  much  increased  by  the  charges  of  transportation,  and 
the  difficulty  of  furnishing  supplies  to  troops  in  a  foreign 
land.  If  the  scene  of  warfare  is  at  home,  the  devastation 
and  losses  to  which  a  country  is  thus  exposed,  are  to  be 
added  to  other  expenses.  The  statistics  of  modern  war- 
fare furnish  many  and  striking  facts  on  this  point. 

No  practice  exists  among  nations,  on  which  the  poHti- 
cal  economist  is  compelled  to  look  with  more  full  and  en- 
tire disapprobation,  than  that  of  war.  Cases  may  indeed 
sometimes  occur,  in  which  the  charges  thus  incurred,  are 
justified  in  view  of  the  benefits  which  result ;  but  such 
cases  are  rare,  and  perhaps  in  all  instances,  the  necessity 
of  resorting  to  measures  of  this  kind  might  be  prevented. 
There  are  also  other  and  more  weighty  objections  to  a 
state  of  warfare,  which  though  indirectly  connected  with 
the  economy  of  nations,  it  belongs  rather  to  the  depart- 
ment of  ethics  to  exhibit  and  enforce.  In  many  points 
of  view,  it  is  most  desirable,  that  this  practice,  which  is 
the  scourge  and  disgrace  of  the  human  race,  may  speedi- 
27* 


318  POLITICAL  ECONOMY. 

ly  be  done  away,  and  those  who  are  engaged  in  attempts 
to  ejSect  this  important  result,  should  receive  the  encour- 
agement and  support  of  every  philanthropist. 

Of  that  portion  of  the  public  revenue,  which  is  expended  in 
the  erection  of  public  buildings  and  in  internal  improve- 
ments. 

The  preservation  of  the  national  property  and  the  con- 
ducting of  public  business,  make  it  necessary,  that  many 
buildings  should  be  erected  at  the  public  cost ;  and  in  the 
erection  of  these  edifices,  not  only  is  utility  to  be  consult- 
ed, but  taste  and  national  pride  may  also  be  gratified. 
Still,  there  should  obviously  be  a  correspondence  in  these 
expenditures  to  the  resources  and  ability  of  the  nation. 
And  what  is  expended  in  this  manner  more  than  is  ne- 
cessary to  meet  the  wants  of  the  community,  may  be 
looked  upon  as  designed  to  promote  the  advancement  of 
the  fine  arts  in  the  nation,  and  to  strengthen  the  love  of 
country. 

Of  the  necessity  and  expediency  of  national  expendi- 
tures for  internal  improvements,  different  opinions  prevail. 
On  the  one  side,  it  is  maintained,  that  there  are  works  of 
great  national  importance,  which  can  be  undertaken  and 
carried  forward  in  no  other  way.  It  is  further  added, 
that  the  resulting  advantages  are  so  widely  and  generally 
difl?ljsed,  that  the  expense  thus  incurred,  ought  in  justice 
to  be  borne  by  the  whole  community.  On  the  other 
hand,  it  is  said,  that  great  difficulties  and  objections  are 
connected  with  the  disbursement  of  the  public  revenues 
in  this  form.  Internal  improvements,  from  their  nature, 
must  be  local,  and  hence  they  are  sources  of  sectional 
jealousies  and  contentions.     There  are  also  temptations 


NATIONAL  EXPENDITURE.  319 

to  abuses  and  corruplion,  which  arise  from  the  opportitni- 
ties  thus  offered  to  the  ambitious  and  designing,  to  effect 
their  selfish  purposes  and  aims.  Economy  also  requires, 
that  so  far  as  is  practicable,  a  different  policy  should  be 
pursued,  since  all  public  works  are  carried  on  at  a  much 
higher  charge,  than  those  which  are  conducted  by  pri- 
vate individuals. 

Could  some  plan  be  adopted,  which  might  obviate 
these  objections,  important  benefits  would  obviously  arise 
to  a  nation,  from  the  portion  of  its  revenues  thus  em- 
ployed. 

Of  that  portion  of  public  revenue,  which  is  appropriated  to 
the  relief  of  the  poor. 

It  is  customary  in  most  nations,  to  make  provision  by 
law  for  the  relief  of  the  poor ;  and  for  this  end,  a  system 
is  adopted,  under  the  direction  of  the  public  authorities, 
for  the  collection  of  revenues  to  be  thus  expended,  and 
for  their  distribution  among  those  who  need  relief.  That 
some  provision  of  this  kind  is  needed,  may  be  learnt  from 
the  following  statement ; 

Justice  requires  it.  Those,  who  either  from  events 
over  which  man  has  no  control,  or  from  their  own  vices, 
have  become  poor,  will  be  found  in  every  community. 
But,  if  it  be  left  entirely  to  individuals  to  afford  relief  to 
the  destitute,  this  burden  will  devolve  wholly  on  those  of 
humane  and  generous  feelings,  while  others,  on  whom 
the  obligation  to  assist  is  equally  binding,  will  contribute 
nothing  to  this  object. 

Humanity  also  requires  it.  Unless  some  system  for 
administering  relief  be  adopted,  and  provision  be  made, 


3^  POLITICAL    ECONOMY. 

to  which  in  extreme  cases  all  may  apply  with  certainty 
of  assistance,  there  is  reason  to  fear,  that  some  may 
perish  from  want.  At  least,  instances  of  great  privations 
and  suffering  would  be  far  more  frequent. 

Economy  requires  it.  The  same  amount,  given  by  a 
judicious  and  w^ell  ordered  system  of  distribution  to  those 
who  reside  under  the  same  roof,  and  sit  at  the  same  ta- 
ble, under  the  supervision  of  the  same  overseer  and  pro- 
vider, affords  both  more  effectual  relief,  and  to  a  greater 
number  of  individuals,  than  when  gratuitously  distributed. 
In  this  way,  also,  a  favorable  opportunity  is  afforded  of 
benefiting  the  poor  in  other  respects.  They  may  be  en- 
couraged and  aided  in  their  efforts  to  supply  their  own 
wants,  and  led  to  form  habits  of  industry  and  frugality. 
And  further,  they  may  be  brought  under  those  moral  and 
religious  influences,  which  are  peculiarly  needed  for  their 
consolation,  and  for  the  reformation  of  any  vicious  habits, 
which  may  have  been  contracted. 

In  opposition  to  this  view,  it  is  said  that,  to  make  pro- 
vision by  law  for  the  support  of  the  poor,  presents  the  ex- 
ercise of  those  generous  and  humane  feelings,  which 
should  be  indulged,  and  strengthened,  and  also  that  relief 
thus  extended  is  wont  to  be  received  without  any  emo- 
tions of  gratitude.  Those  who  administer  it,  are  oppres- 
sive and  overbearing,  those  to  whom  it  is  given,  claim  it 
as  a  right,  instead  of  thankfully  receiving  it  as  a  charity. 

It  is  replied  to  this  objection,  that  to  make  provision 
by  law  for  the  support  of  the  poor,  w^ill  neither  prevent 
the  opportunity  or  necessity  of  private  charity.  Cases 
will  often  present  themselves  in  every  neighborhood,  in 
which  the  generous  and  humane  feelings  of  the  heart 
may  be  indulged.     The  manner  of  administering  public 


NATIONAL  EXPENDITURE.  321 

relief  may  also  be  such,  as  to  be  free  from  the  abuses  re- 
ferred to.  It  need  not  render  the  situation  of  a  pauper 
desirable,  and  still  it  may  afford  comfort  and  effectual  as- 
sistance. But  this  leads  me  to  notice  another,  and  the 
principal  objection  to  public  charity. 

I  refer  to  the  statement,  so  often  made  on  this  subject 
in  connexion  with  the  poor  law  system  of  England,  that 
to  make  provision  by  law  for  the  support  of  the  poor 
encourages  improvidence  and  idleness.  It  is  indeed  true, 
that  the  poor  rates  of  England  are  a  heavy  burden  upon 
the  inhabitants  of  that  country,  and  also,  that  much  incon- 
siderateness  and  profligacy  and  idleness,  are  found  in  the 
lower  classes  of  her  population.  But  it  is  by  no  means 
a  sure  inference,  that  the  pauperism  and  other  evils  found 
in  that  nation,  are  to  be  traced  to  her  system  of  poor  laws. 
Some  of  them  are  without  doubt  to  be  attributed  to  other 
abuses,  connected  with  the  institutions  of  the  country  and 
the  management  of  public  affairs,  especially  with  the  ex- 
tent, to  which  her  restrictive  measures,  and  her  oppres- 
sive direct  taxation  have  been  carried.  Neither,  if  it  be 
true  that  England  by  her  pauper  system  makes  her  own 
poor,  does  it  necessarily  follow,  that  in  other  countries 
a  system  may  not  be  adopted,  which  shall  not  be  attended 
with  these  unhappy  results. 

The  existing  arrangements  in  the  United  States  for  the 
relief  of  the  poor,  are  thought  to  combine  as  many  advan- 
tages, and  to  be  as  little  open  to  objection,  as  any  which 
can  be  devised.  There  is  an  equal  distribution  of  the 
burden  ; — effectual  relief  is  provided,  and  at  the  same 
time  those  moral  influences  are  brought  to  bear  upon  the 
poor,  which  may  lead  to  the  improvement  of  their  char- 
acters and  condition.     Moral  reform  is  also  effecting  much 


322  POLITICAL  ECONOMY. 

for  the  diminution  of  pauperism  in  the  United  States. 
Whether  in  the  progress  of  this  nation,  the  plan  now 
adopted  shall  be  found  insufficient  or  become  subject  to 
abuses,  time  will  shew. 

Of  tlmt  part  of  the  national  revenue,  which  is  appropriated 
to  Education. 

A  nation  is  evidently  interested  In  the  cultivation  of 
the  sciences,  and  the  general  diffusion  of  knowledge, 
within  its  limits.  In  different  parts  of  this  work,  it  has 
been  shewn,  that  the  former  is  intimately  connected  with 
the  developement  and  improved  use  of  the  aids  of  nature 
in  the  different  branches  of  production,  and  thus  with  the 
supply  of  human  wants.  The  latter  also,  as  it  makes 
the  laboring  classes  of  a  community  more  skilful  and  in- 
telligent in  their  labors,  and  leads  them  more  fully  to  un- 
derstand the  relations  and  duties  of  life,  and  to  appreci- 
ate more  highly  their  rights  and  privileges,  is  conducive 
to  the  national  quietness  and  prosperity. 

But  here  the  question  arises,  how  far  it  becomes  ne- 
cessary, that  for  securing  these  important  results  public 
assistance  should  be  given?  In  respect  to  many  branch- 
es of  education,  it  is  evident,  that  the  interests  of  individ- 
uals, as  connected  with  their  success  in  the  different  em- 
ployments and  pursuits  In  life,  will  lead  to  their  cultiva- 
tion. Still,  even  in  these  instances,  it  may  be  economy 
on  the  part  of  a  nation,  to  furnish  at  the  public  charge  fa- 
cilities and  helps  for  professional  education.  But  there 
are  other  cases,  in  which  study  and  research  are  highly 
useful  and  important  to  the  community,  while  no  corres- 
pondent benefit  results  to  the  individual,  who  is  engaged 
in  these  pursuits.     It  is  so  with  the  man  of  science,  who 


NATIONAL  EXPENDITURE.  323 

investigates  and  developes  those  laws  of  the  natural 
world,  and  those  principles  in  science,  which,  when  thus 
discovered  and  made  known,  are  applied  to  important 
practical  and  profitable  uses,  from  which  however  the 
discoverer  receives  no  pecuniary  benefit.  In  this  view, 
then,  since  the  public  is  so  deeply  interested  in  the  labors 
of  scientific  men,  there  is  reason,  why  public  aid  and  en- 
couragement should  be  extended  to  all  who  are  thus  em- 
ployed. 

If  too  we  look  at  the  other  result,  which,  it  is  evidently 
important  to  the  community  should  be  secured — the  gener- 
al diffusion  of  knowledge,  the  reasons,  which  shew  the  ne- 
cessity and  expediency  of  public  aid,  are  obvious.  A 
large  portion  of  the  less  wealthy  classes  of  society  are  un- 
able to  provide  instruction  for  their  children  in  the  com- 
mon branches  of  education.  Their  revenue  is  barely  suf- 
ficient to  meet  their  more  pressing  and  daily  wants.  Oth- 
ers, who  are  able  to  furnish  the  means  of  education  to 
their  children,  do  not  appreciate  its  importance,  and  neg- 
lect it.  In  such  cases,  the  general  good  evidently  re- 
quires, that  some  portion  of  the  public  revenues  should 
be  directed  to  the  support  of  schools,  in  which  the  poor, 
free  of  all  charge  and  expense,  may  be  taught  the  rudi- 
ments of  knowledge. 

It  is  thus,  then,  in  the  highest  and  lowest  departments 
of  education,  that  the  necessity  of  public  assistance  is 
most  urgently  felt ;  and  this  aid  may  be  extended  both  in 
encouraging  and  rewarding  those  who  are  employed  in 
this  work,  and  in  oflTering  facilities  and  helps  for  the  ac- 
quisition and  diffusion  of  knowledge.  Hence  then  we 
may  infer  the  utility  and  importance  of  the  common 
school  system  of  New  England,  by  which  the  rich  are 


324  POLITICAL   ECONOMY. 

made  to  contribute  for  the  education  of  the  poor,  and  by 
which,  also,  the  school  room  with  all  its  privileges,  be- 
comes accessible  to  the  humblest  child  in  the  community. 
But  in  addition  to  this  view,  which  exhibits  the  impor- 
tance of  education  to  the  national  welfare,  from  its  con- 
nexion with  scientific  discoveries,  and  the  general  diffu- 
sion of  knowledge,  it  may  be  remarked,  that  whatever 
pertains  to  the  cultivation  and  improvement  of  the  men- 
tal powers,  to  the  increase  of  knowledge,  and  to  the  grat- 
ification of  the  taste,  is  intimately  connected  with  nation- 
al prosperity  and  happiness.  And  that  portion  of  reve- 
nue, whether  private  or  public,  which  is  thus  expended, 
if  it  may  not  strictly  be  regarded  as  a  productive  invest- 
ment of  capital,  is  a  rational  and  highminded  consump- 
tion of  wealth. 


END. 


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